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Although people look forward to retirement for most of their working life, money often ends up being an issue, and you need to find creative ways of creating financial stability. However before you resort to extreme measures, why not consider a reverse mortgage application? It is safer than a conventional loan, because you do not forfeit your assets if you are unable to make a payment. It is a very good way of staying clear of all sorts of financial trouble, but what exactly is a reverse home loan?
It protects your assets
When you take out a long-term reverse mortgage, you will not be responsible for making any repayments until you decide to leave the house to which the loan is bonded. The loan can also be declared null and void if you can’t adhere to any of the other loan conditions that make the loan legally valid under your name.
It is believed that reverse mortgages originated in Maine, way back in the 60s, when a woman submitted a special loan request to a lender after she had lost access to her husband’s income. The lender devised the reverse mortgage to help her, and with this new solution, she was able to keep her home and her other assets, and a brand new way of doing finance came into being.
Backed by government or on your own
You can apply for a reverse mortgage in one of two ways: either through a government agency, or through a bank or any other similar private lender. The only difference is that when you take out a government-backed loan, it is known as a home equity conversion mortgage, and is guaranteed by the government, where a private reverse home loan is not. Everything else is exactly the same.
Take receipt of your money
During the process of finalising the terms of your reverse mortgage, you need to make a decision about how you would like to take the possession of the money. At the end of the day it comes down to one of three options: The first is to have the money paid into your account in regular, equal monthly intervals, similar to how you would have received your salary when you were still working. This option makes your monthly income predictable and helps to create a consistent monthly budgeting system. The second way is to set it up as a line of credit, where you are able to access small amounts of the money as and when you need it navigate, almost like you would have with a credit card. The final option is to have a single bulk deposit made straight into your account, which would cover you for larger expenses like unexpected medical bills, by giving you access to the maximum amount of cash in one go.
The bottom line
As long as you are compliant with the conditions that the lender has set for a reverse home loan, there should be no problem with you taking out this financial solution, if you are aged 62 and above.