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17 August 2020

What to look out for when applying for a reverse mortgage

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The guaranteed side effect of retirement is a definite change in lifestyle, in particular when you suddenly see a massive decrease in spending money compared to what you were used to during the time you were still working. Rather than remortgaging your house and setting yourself up for a further debt trap, look at the alternative for people of 62 years of age and older - chase mortgage. As soon as you reach the minimum age you will be able to apply for a home loan as long as you are compliant with a full range of loan conditions, such as being the full-time owner and resident of your house. 



How do you access your money? 

A reverse mortgage is easy very useful as it can be accessed in several different ways. One way is as a monthly payment from your lender, is to set it up as a line of credit, so that you can access the money as and when you need it in amounts that suit the situation. Another option is to have it paid out as a large bulk amount, all in one go. The most popular option is to receive your payment in monthly installments, similar to a salary. This option makes it easier to budget, as you will know how much money you have coming in and when. Your lender will be able to advise you on the most suitable option for your circumstances. 


Is there a limit to how much I can borrow? 

Your lender will assess your financial situation using a tool called a reverse mortgage calculator, as soon as you apply for one. This to help your lender to gauge what your exact financial position is, before committing to giving you a loan. The tool takes many aspects of your house into consideration, such as its age, its actual condition and where it is located, but also considers how much money you owe on your initial mortgage, if any. On the topic of an existing mortgage, don't worry - having one doesn't limit you from applying for a reverse home loan. You will have to remember that your outstanding sum will have to be settled using funds from your reverse home loan, before you can continue using the money that has been made available to you. 


Anything you’re not telling me? 

Just because it is a useful and very practical solution to getting money in your retirement days, doesn't make it a fix all. Even a reverse home loan is still a loan, and that means it comes with conditions. One of the main ones relating to a reverse mortgage, is that you have to be a permanent resident of your home for as long as the loan is valid. On the downside, that means prolonged absences from your house, such as six months abroad, is not an option. On the upside, shorter periods like normal length holidays, are still permitted. And with the money you will shortly have available thanks to a reverse home loan, you might as well start planning the next one!


 
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