After retirement, a lot of people find it’s much harder to get by than they might’ve realized or planned for while they were still working. It’s easy to start struggling to pay for monthly expenses and find yourself stuck with some unpleasant options. Many retirees end up asking adult children for help or cutting back on things they really wanted to enjoy in their lives after retirement.
While some people out there are very well set for retirement there’s still a lot of people left with very little in the way of options to get by in life. This is where people start considering things like a reverse mortgage loan. Reverse mortgage loans are designed for people aged 62 or older who have typically built up quite a bit of equity in their homes at this point in their lives.
In the past reverse mortgage loans have gotten a bad wrap for understandable reasons. But there are some big changes that have taken place in regards to regulating this type of loan to prevent predatory lending. This means the loans are really a better option than you might realize if you haven’t had to research them recently. There are some serious benefits you should consider if you’re making a decision about getting a reverse mortgage loan.
How Does A Reverse Mortgage Loan Work?
A reverse mortgage loan works by allowing you to take out a loan based on the equity you’ve built up in your home. You can get the loan payment in a lump sum up front or in monthly payments over a period of time. The loan is repaid when you sell the home, or you are no longer permanently residing in the home as your primary residence.
Because the repayment is made when the home is sold or a change of residence occurs, most people choose to repay the loan using the money made from the sale of the house. You can also choose to repay the loan out of savings if you have enough built up by the time repayment is due.
If your loan becomes due because you have passed away the heir to your home can convert the loan into a traditional mortgage or (if they’re qualified) another reverse mortgage. The heir to the home can also choose to repay the loan by selling the home itself just as you could do as the loan originator.
Are There Benefits To A Reverse Mortgage?
In short- yes. There are quite a few benefits you could consider when you’re thinking about a reverse mortgage and wondering if it would work for you. It depends on your specific situation which benefits will be more important to you than others. Here are some of the benefits you could consider:
● You’ll Have Access To Some Cash:
Depending on your situation in retirement you definitely could find that you’re struggling to pay for regular monthly bills. If you have considered your options and decided to look at a reverse mortgage loan you definitely will have access to cash. Even if you choose the monthly payout option you’ll still have some positive cash flow coming in.
This could mean you’re able to pay your bills, pay off other loans, build your savings back up, or use the money from the loan to increase your quality of living by doing something like traveling frequently. The way you use the money from your loan is entirely up to you.
● You Could Eliminate Your Current Mortgage Payment:
A lot of people mistakenly assume you have to have your home paid off to qualify for a reverse mortgage loan. This isn’t actually the case. There are quite a few reverse mortgage borrowers that haven’t yet paid off their house entirely.
While a traditional mortgage is going to continue to require a monthly payment, a reverse mortgage loan doesn’t. If you’re struggling to get by because you’re stuck paying a house payment every month you could use a reverse mortgage loan to pay off the mortgage and free up that money for other things in your life.
● You Can Make Your Retirement Savings Last Longer:
Sometimes even if you feel like you have saved a lot for your retirement you might find that you’re dipping into that savings sooner and more often than you’d like. If you’re concerned about continuing to keep your nest egg as built up as you can you could look to a reverse mortgage loan to help you out.
With some extra income from the loan coming in you’ll end up having to touch your savings less, which will help it last longer than it otherwise might. It depends on how quickly you’re using your savings and how much you want to keep put away and for how long. If your savings lasting as long as possible is important you could consider getting a reverse mortgage loan to help make that happen.
Should I Get A Reverse Mortgage Loan?
You’re the only one who can make that final decision, but there are clearly many benefits to consider. In addition to the benefits you’ve read about, there are other things in place now that make a reverse mortgage loan safer than it would’ve been in the past.
You’ll have to take some loan counseling in order to get your loan but that’s not a bad thing. It just makes sure everyone who is getting a reverse mortgage loan fully understands the process. The counseling related to your reverse mortgage loan can also help you answer any questions you might still have lingering.
Remember to keep in mind that you’ll still have to pay for homeowner’s insurance, property taxes, and maintain your home as needed. These requirements don’t change just because you may be eliminating a traditional mortgage payment.
If you’re ready to follow some simple terms like the ones just mentioned, a reverse mortgage loan could be a great option for you. Your financial situation really does stand to benefit from this type of loan, especially if your standard of living has decreased since you’ve retired.
As long as you are informed about the loan type and how it works, you’ll probably find the benefits are too great to pass up. If that’s the case then sign with confidence and enjoy your new (and improved) financial situation.