This type of mortgage is worth investigating if you want to add something to your retirement fund. If you plan to stay in your current home for the foreseeable future, then you should consider using some of your home equity to help you with your retirement. If you haven’t heard about a reverse mortgage, check out these tips on how to get it.
1. How do you qualify?
The reverse mortgage is intended for those who are 62 or older and planning to retire. If you fit that description and you own your home, you might consider taking advantage of a reverse mortgage. You also need to meet all the property standards and you are up to date with paying your property taxes, homeowner insurance and any other cost for living in your home. If you are married, your spouse also needs to be mentioned even if he or she won’t be a co-borrower.
2. Loan Application
If you qualify for the loan, the next step is to file an application for a reverse mortgage. Your lender will have to examine your credit history and any other mortgage loans or federal debts you might have. They will also need access to income statements such as a pension, social security, and so on. They need to determine if you can afford to continue paying all the costs associated with your home.
The last step is for the lender to arrange a property appraisal to analyze the worth of your home. This will determine how much money you can get in a reverse mortgage.
3. Mandatory Counseling
It is obligatory to go through independent counseling that will help you understand everything related to a reverse mortgage. A neutral financial specialist will give you all the facts needed to make the right decision, without even discussing anything with your lender. You are borrowing against your home’s equity so you need to understand how a reverse mortgage can deplete that equity in time. This depends on how much money you borrow and the worth of your home.
4. When will you get your funds?
You have several options when it comes to receiving your payments and this is why you should thoroughly examine your financial conditions. You need to plan your retirement and know where most of your budget will go. Why? Because you can choose several payment options. You can set monthly payments yourself as long as you live there. You can set monthly payments only for a certain number of months. You can open a credit line and only use the money whenever you need it. Or you can combine these payment methods.
Another option is a fixed-rate mortgage which means you get a one time sum of money after you close the deal. If you choose this option, you need to very thorough with your financial planning. With a lump-sum payment you need to know how to manage this money and when to use it to take the most advantage of it. For instance, you can use it to pay debts, medical bills or any living expenses.