The purchase of a home is usually one of the most expensive and long-term investments that you will make during your lifetime. A home is also one of the greatest assets that you will retain over time.
You can transform the equity in your home into usable cash that can help you pay for the purchase of a vehicle, fund your retirement account, or take your dream vacation. A reverse mortgage puts your home to work paying you for the years you have spent faithfully paying your mortgage.
What is a Reverse Mortgage?
To determine if you will benefit from a reverse mortgage, you need to understand what these financial products are and how they work. A reverse mortgage is a loan you take out against the equity you have built in your home. A financial institution will need to approve your loan, and you can expect to pay interest on the money you borrow.
The benefit of a reverse mortgage loan over a more traditional personal loan is the fact that you do not need to repay the principal amount of the loan. Since you are tapping into your own home equity, you keep the principal paid to you and only pay the interest on the reverse mortgage when you sell your home.
How Can You Qualify For a Reverse Mortgage?
Not all homeowners will qualify to take advantage of the benefits a reverse mortgage can offer. Financial institutions typically require that you be a senior citizen, have a defined percentage of your home mortgage paid, and have a home that falls within certain value parameters.
Each of these variables is determined by the individual financial institutions offering reverse mortgages to the public. Visit with a mortgage professional to determine if you meet the requirements for a reverse mortgage before you submit your application.
How Can a Reverse Mortgage be Used?
The funds that you can access through a reverse mortgage may come with some restrictions. If you apply for a single-purpose reverse mortgage, you will need to use all of the dispersed funds for the purpose designated on your application (typically major home repairs or medical expenses).
If you want to utilize your funds for something more recreational (like a family vacation or new car), you need to apply for a proprietary reverse mortgage loan. This loan gives you maximum freedom to spend your payments as you see fit.Share