Steps to Getting a Reverse Mortgage

If you are retired, you meet qualifications for several new things. One is a particular type of home loan called a reverse mortgage. It lets you tap into the available equity of the property and spend it as ready cash, assuming you are fully eligible for it. Here are some of the steps to qualifying for and getting a reverse mortgage.

Ask Yourself if the Reverse Mortgage System Works for You

A reverse mortgage is not like a standard home loan. The reverse loan provides you with money with no immediate consequences. No bills are issued to you. That is the upside. The downside is you have to stay in the home for as long as you want the loan to last. You also have to pay a lot of interest eventually because the loan stays active for a long time.

Meet Personal Reverse Loan Eligibility Needs

To get a reverse mortgage you must be over 61 years of age by federal law. If your spouse is also signing the contract, he or she must also be over 61. Additionally, you have to prove a level of responsibility as a homeowner. For example, you must prove ability to consistently pay taxes and other basic expenses. A credit check may be required for that purpose.

Meet Home Type-Related Loan Eligibility Requirements

The next step is to make sure your home itself qualifies. One qualification requirement is a high enough value. A reverse mortgage amortization calculator is one of the tools used to make that determination. That reverse mortgage calculator tool is designed to determine the amount you can borrow and the size of each payment, whether single lump sum or ongoing installments.

The home type matters because it must typically be a single family home or an apartment building with less than five apartments. If the latter, one apartment must be your personal residence. The home must also have a high enough value for the reverse mortgage calculator to determine it is worth borrowing against. Factors like limitations set by law contribute to making that determination.

Make Sure You Understand Reverse Mortgage Nuances

Before you take out a reverse mortgage, you must understand the nuances of the agreement you are about to sign. For example, you should have a clear understanding of closing costs that will be deducted from what you borrow. The same is true of other up front fees. You also need to make sure you are comfortable with the established loan interest rate, especially since the loan may accrue interest over an extended period of time.

Settle Any Existing Home Loan You Have

When you successfully apply for a reverse mortgage, you are obligated to quickly settle any existing home loan you have. You can get a reverse loan when you already have a standard one, but you cannot keep both concurrently. Funds are taken away from what you can borrow with the reverse loan and allocated for repayment of the initial traditional mortgage.

Decide How to Withdraw and Spend the Money

You can withdraw reverse mortgage funds at will using a line of credit. You can also opt for automatic receipt of monthly checks. If neither of those suits your needs, perhaps a single payment does. All of those are available options, but you must make that choice in the beginning. Sometimes determining how you plan to spend the funds ahead can help you figure out which payment receipt method you need.

Expanding on These Basic Reverse Mortgage Steps

These are only the basic steps of reverse mortgage application. Before you sign a reverse loan contract, you must know all the steps involved. Talking to an experienced mortgage adviser specializing in reverse loans is an ideal option. If he or she is not directly affiliated with your lender, you will know the information you receive is unbiased and thorough.