It is no secret that retirement is associated with a lower income level than what you would have grown
accustomed to in your working years. One way to get around this is to use the equity you already have
on your side – your home – to free up some extra cash. And I don’t mean taking out a regular loan
either – a reverse home loan is a solution you need if you are looking to make massive changes to
how you experience your retirement.
A reverse home loan beats any other loan in retirement – but why?
A traditional loan definitely has its uses, but in a time when you are expected to have a lower income, it
might not be such a good idea, and many people find themselves cash-strapped due to the strict
repayment rules and relentless monthly payments. The consequences of missing one of these payments
can be dire – you can be at risk of foreclosure and even eviction if you do not pay the right amount on time.
With a reverse mortgage, none of this is a risk, if you stick to your loan agreement. There are no monthly payments – a reverse-home loan is designed to give you the maximum access to your money over a long period without the burden of repayment.
You cannot be evicted for non-payment either, as you will not be bound by a repayment schedule.
However, compliance with the rest of the loan conditions is a must in order to keep your loan valid!
One of these is that you need to live in the home, which is bonded to the loan permanently, and leaving
the house for extended periods of time for reasons other than medical, could put you in violation of
your loan conditions. You will also contractually have to ensure that your taxes, insurance, and any
other home expenses are up to date.
Determining your loan amount
Before a loan can be granted against the value of your home, the value will first need to be determined.
Your lender will make use of a reverse mortgage calculator to do so. All relevant factors will be
considered such as your home’s age and location, what condition it is in, what the federal cap on your
loan amount is, and what your overall financial standing looks like.
Important information you should not ignore
You will not be able to apply for a reverse mortgage with a holiday home or a rental property, and this
goes against the regulation that you have to be the permanent and long-term resident, as well as the
legal owner. If you own a multi-dwelling property with up to four dwellings, you may apply, as long as
you are the permanent resident of one of the units.
How does it work if I already have an active mortgage?
Simply, you will not be allowed to have funds outstanding on another. But a reverse home loan allows
you to pay off what you owe on the initial loan, using funds from the reverse mortgage loan, after
which you will be able to access the rest of the money as your own.
Have you ever considered a reverse mortgage?