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At the moment, retirement may not seem to draw any closer, as you are probably below 50, or even 40 years. However, we all see retirement as a time to relax from our long years of hard work in various fields and enjoy our lives to the fullest. This phase marks a time to travel around the world, enjoy incredible moments with our families, and embark on activities that we have long imagined. However, one thing tends to jerk us back to reality – money. Yes, this is a great tool that can make all your dreams come through. It is also what determines the outcome of your retirement.
So, if you are wondering how to make your retirement all sunshine and rainbows, then you may want to consider opting for a reverse mortgage. This unique loan gives you the financial support you need without putting you under pressure to pay back. It is an ideal way to keep up with your ever-present financial needs. However, before you pick up the phone and contact your local lender, you need to know the terminology embedded in this financial safety net. First, let me open up you up to what a reserve mortgage means.
What is a Reserve Mortgage?
You know how you obtain the standard mortgage and get to hustle to meet up with monthly repayments, right? How does that make you feel? Were you stressed out? Nervous? Unhappy? Yes, those are the feelings you get when you are under pressure to repay your home loan.
However, it is a different ball game entirely for reverse mortgage borrowers. In actuality, you get paid to take a loan on your home, provided that you are the legal owner of your home, and you reside in it, permanently. So, let’s proceed to learn some of these concepts.
HECM What is HECM?
You may ask. This acronym means “home equity conversion mortgage.” Unlike the reverse mortgage you get from a local lender, government agencies offer HECM to homeowners. What makes this loan different from that of a private lender is the fact that it has government insurance, and not just that, it also comes with more rules.
Reverse Mortgage Calculator
Lenders use this evaluation tool to calculate several aspects to determine your eligibility for a reverse mortgage loan. When considering your home value, the private lender checks its age, condition, and location. It is worth noting that you cannot borrow the total value of your home equity, as set up by the federal law. If there is a current mortgage, you have to clear it first, before funds can be accessible. If the home serves as collateral to an existing loan, it may affect its equity negatively.
How to Receive Payments
There are three ways you can set up your reverse mortgage payment. Once your money is accessible, you can set it up a line of credit. With this option, it is easier to access your funds as a credit facility whenever you want. Another option is to receive it as a lump sum. This option is ideal for individuals who have various financial needs to meet. The last option is to set it up in the form of monthly payments. That way, you actively earn from your loan.
