Reverse mortgages can be something of a complicated subject for many. They are shrouded in mystery and jargon. For many, they don’t know what the best course of action to take is. A reverse mortgage doesn’t need to be a scary financial term. We simply need to cut through the jargon and make sure that you are armed with nothing but the facts.
After all, knowledge is power. So, once you are armed with all of the facts regarding this kind of mortgage, you can make a sound financial decision based on your needs. Easy!
What is a Reverse Mortgage?
A reverse mortgage is akin to a loan. But, you only qualify for this kind of loan when you are aged 62 and over. It’s kind of like a retirement financial plan. But, instead of putting money into an IRA, you simply take the money from your home.
Over the years, you may have built up a large equity pot in your property. If this is the case, a reverse mortgage will allow you to make sure that you see the benefits of the properties equity. Therefore, you take out a loan against the equity. Take a look at a reverse mortgage guide for more information. It’s a very similar concept to taking out a home equity loan.
What Can the Money Be Used For?
There are no restrictions on what you use the credit for. You can use a reverse mortgage loan for a wide range of things. Some people prefer to use it to top up their pensions and incomes. Others like to use it pay for holidays and once in a lifetime opportunities. Some people choose to have the money there to give to their loved ones to help them out. The possibilities are endless when it comes to a reverse loan. As there are no restrictions on how you spend the money, you are free to make the right financial choices that suit your needs. After all, it’s your cash. You are free to spend it of your volition.
Image source: American Advisors Group
So, Why is it Called a ‘Reverse Mortgage’?
In theory, the reverse mortgage means that you are taking the traditional mortgage and using the cash while you are in the property. So, instead of making payments on your mortgage, you pay the loan back.
Many people feel that there are a lot of myths with a reverse mortgage. They fear that they will lose their home as a result of taking out this kind of mortgage. This is not true. You don’t have to give up your home. What is more, you don’t have to worry that your children will not have their inheritance from your property. For many homeowners, they like the fact that they can pay back the loan when the property is put up for resale. Some people choose to pay it off before. You need to make sure that the loan is repaid, but this can be done when the property goes up for sale. Or, you can pay it off in monthly installments. There is an element of flexibility with this type of loan. This is why it’s a very attractive prospect for many retired people.