You will face a daunting amount of expenses in your retirement years. If you have paid off your home or only have a small mortgage, you can opt for reverse mortgage to over those retirement expenses. It lets you borrow against the equity you have gathered up in your home. By paying heed to this, you can supplement your income and stay in your current residence. If you are thinking to get this in your retirement, you will want to know how it works and its benefits for you in your retirement years.
Here are some factors to consider before getting one.
- Comprehend what it entails.
These mortgages are viable to those who age 62 or more. In order to be eligible, you must reside in the home as your primary residence. This mortgage is different than the regular mortgage. In the latter, you pay some amount of money to the lender on a monthly basis. Reverse mortgage is established so as the lender pays money to you. The value you will receive will be determined on the value of your home you live in. This mortgage helps in keeping the title to your home. You will also need to maintain your home, the property taxes and homeowners’ insurance as well.
- Check the payment options
There are many ways to receiving the funds from a reverse mortgage. You can opt for a lump sum, monthly payment or a line of credit or a combination of these options. There are many cases in which some homeowners seek for a supplement to monthly income, while there are some who need to cover a huge one-time expense or just have access to funds in the case of any emergency.
- Check your equity.
A reverse mortgage is an ideal choice only if you have a huge amount of equity in your home. If you are still bearing a small mortgage in the retirement phase, you should and must consult with your financial advisor to help you in evaluating the available options. The duty of the mortgage lender is to advise on the amount of equity homeowners will require and determine the amount they will be able to withdraw. There is also some sort of fee involved in the initial expenditure like closing costs, appraisal fee etc. Make sure you discuss this with your lender too, so as to avoid last minute expenditure.