Retirement is supposed to be a time to kick back and enjoy life. However, it usually results in a major decrease in income. Yet, it can cause your bills to increase, especially if you suffer from any medical conditions or experience any type of financial hardship relating to a specific event. Even paying regular monthly obligations might be difficult enough for you. A reverse mortgage may assist you. Here are some answers to questions you might have regarding such a retiree-only loan for your home.
What Does Retiree-Only Mean in the Case of a Reverse Mortgage?
Technically, you do not always have to be retired to apply for a reverse mortgage. However, you do have to be at least 62 and meet other qualifications. You also have to own your primary residence and apply for the mortgage on that residence, not a different property. Additionally, if you want your spouse to cosign, he or she must meet the same requirements.
How is a Reverse Mortgage Superior?
Traditional and reverse mortgages both have advantages and disadvantages. However, a reverse mortgage is superior in terms of immediate spending freedom. That is because it takes many years before you have to repay the balance on one. However, to truly understand all the nuances of a reverse mortgage you need to read more than one unbiased reverse mortgage review. You should never take the process for granted without knowing exactly how it works. Your lender may not give you as many details as you want upfront.
Can You Have Two Concurrent Mortgages?
Having two concurrent mortgages is both possible and impossible. It is possible in the sense that you can still apply for a reverse mortgage with a preexisting traditional mortgage on your house. However, you cannot maintain both loans on the same property on a long-term basis.
If you are found to be eligible for a reverse mortgage on a property that is already mortgage, expect some special circumstances to apply. For example, your lender will require you to immediately extract funds to repay the standard home loan. That means the money you can use for other purposes will be greatly reduced.
Can You Get Out of a Reverse Mortgage Without Paying it Off?
Another question is what happens if you want to get out of a reverse mortgage but do not have the funds to pay the balance or do not want to pay it? The answer is the home is sold off. Proceeds first go to the lender to cover your balance. Anything left over goes to you. If you still have a debt after the sale, that debt is eliminated. Your vehicles or other personal property are not part of the agreement, so they are not in danger of sale.
Do You Have to Pay Any Interest?
You may also be wondering about interest rates. A traditional loan comes with interest you have to pay. However, you have a rough idea of how much interest you will pay up front because the loan is only active for a set length of time. A reverse mortgage requires you to pay interest also, but there is no way to know how much when you sign the loan agreement. That is because the loan could last for a variable number of years. What is almost certain is that you will have to pay more interest in total than you would with a traditional loan.
When Should You Sign a Reverse Loan Contract?
You should only sign a reverse loan contract if you expect to stay in your home for several years. Also, you need to be reasonably sure you can keep up the financial responsibilities of home ownership during that time. Additionally, you should never sign such an agreement if you are confused about any aspect of it. If anything is unclear, ask the lender questions or seek out a third party reverse loan specialist.