When to Think About Obtaining a Reverse Mortgage ♥

There is something to be said for the freedom you get when you retire. However, that freedom might not matter if you do not have the cash available to use to enjoy it. Alternatively, you might think you are financially set to kick back and relax in your golden years, but then you might suddenly encounter a medical bill or other unplanned expense. In either case, when you need extra retirement funding, you might just need to look around you. Your home could meet that need through a reverse mortgage. But before you think about obtaining one you need to know a few things about the process.

The Definition of a Reverse Mortgage
If you are unclear about what a reverse mortgage is, to put it simply, it is a mortgage that provides you with money without the need for any portion to be repaid in the short term. A traditional home mortgage has a payment schedule. You must meet the minimum payment requirements each month to achieve full repayment by a set date, which is usually a few years away. A reverse mortgage has no such set payment period or scheduled ongoing minimum payment procedures. Therefore, you can spend the money without increasing your immediate financial burdens.

The Size of a Reverse Mortgage 
The next thing you need to know before getting a reverse mortgage is if your home has enough value to make the process helpful. There are laws in place that prevent the full amount of available equity from being borrowed. A reverse mortgage calculation tool allows you to determine the total amount you can request from the lender. The specially designed online tool takes into account several factors and uses a specific formula to make sure the amount the lender provides to you meets all federal guidelines.

The Payments Your Can Receive with a Reverse Mortgage
The process of determining what you can borrow is only one step down the road to getting a reverse mortgage. After getting the information you need from the reverse mortgage calculator, you can set payment terms with your reverse mortgage lender. For example, you can choose a truly reverse scenario in which you receive monthly payments up to a certain total amount. Alternatively, you can ask for one lump payment. A large single payment may be required if you are struggling with a high medical bill, a major home repair or another similar expense. If you are financially stable now but anticipating an occasional need for cash, there is a third option. It is called a home equity line of credit. It allows you to treat your reverse mortgage balance available like a credit card. You can request the exact amounts needed when you need them.

How Long a Reverse Mortgage Lasts
A reverse mortgage has no specific date by which it must be paid. Instead, the length of the loan is determined by how long you adhere to the loan requirements or when you choose to pay the balance. For example, the loan can be called in if you file for bankruptcy or fail to meet the requirements of home ownership. It can also be called in if the home is ever no longer your main residence.

Fees Associate with Reverse Mortgages
Before you apply for a reverse mortgage, you must also understand it comes with fees similar to those associated with a standard home mortgage. For example, you have to pay closing costs, but they are taken out of the total you can borrow ahead of time rather than charged to you after the fact. The loan will also accumulate a lot of interest because it is a long-term mortgage. You need to be prepared to pay that interest when the time comes or allow the sale of your home, if you are unable to pay the loan balance with interest.