Have you ever heard of a retirement home loan? It exists, and it is called a reverse mortgage. A traditional mortgage is one that can help you on a very short-term basis. It also gives you another bill to worry about. A reverse mortgage provides more long-term assistance with no immediate strings attached. It lets you access your money free and clear, at least for a while. If that sounds goo to you, it may be time to apply, but first there are some pros and cons worth considering.
Reverse Mortgage Pro: You Have No Repayment Schedule to Follow
One of the biggest pros of a reverse mortgage is there is no repayment schedule. You will not see a bill each month like with a traditional mortgage. You also will not have a set loan period. A traditional loan must be paid back during a set period, like 5 years. A reverse home loan lets you extend the loan for a much longer period, as long as you remain the owner of the home and continuously live in it.
Reverse Mortgage Pro: You Get Your Money How You Want It
Another reason to consider a reverse mortgage is you have borrowing flexibility that can help you with specific retirement concerns. For example, requesting equal payments each month for as long as there is available home equity to borrow can help you pay ongoing monthly bills. That option functions similarly to receiving the paychecks you may miss when you retire.
Although monthly installments are popular, they are not your only choice. Another possibility is you may want to borrow cash only when you need it. If so, you can treat a reverse mortgage similar to a credit card by borrowing certain amounts only when you need them. You could also opt to sign up for a reverse mortgage due to an unexpected major expense, such as a bills relating to a medical condition. A large single payment can help you dig out from such a debt quickly.
Reverse Mortgage Pro: You Can Enjoy More Housing Security Fear-Free
When you take out a traditional mortgage on your home, you run the risk of foreclosure. All it takes is missing a payment to put your home in jeopardy. A reverse mortgage provides you with much more housing security for two reasons. The first is the reverse mortgage lender actually requires you to stay in your home as part of the mortgage agreement. At no time will your lender want to evict you. The second is there is no payment schedule. Therefore, you cannot miss payment due dates because such due dates do not exist.
Reverse Mortgage Con: You Have to Stay in Your Home
Although home security is considered a reverse mortgage benefit, it can also be a problem. Since you are not allowed to move away without the loan becoming due, you are obligated to remain living where you are for a long time, if you want to keep the loan agreement intact. Also, one of the reverse-mortgages downsides is if you are ever forced to leave your home for any reason, such as long-term hospitalization, the loan may be called in.
Reverse Mortgage Con: Some Initial Fees and Stipulations Apply
Being 62 or older is not the only requirement for getting a reverse mortgage. There are other stipulations. One is you may not maintain two mortgages at once. If you already have a traditional home mortgage, you can apply for a reverse loan. However, you must use some of the money you receive to immediately pay the balance on the first home loan. Other fees like closing costs are also immediately deducted from the total available to borrow.