If you are approaching the age of 62 and wonder how you will ever pay for your retirement with the seemingly imminent loss of social security, one option that many people are finding beneficial is the reverse mortgage. If you already own your home or if it is nearly paid off, this can be a viable option that may help you enjoy your retirement years as it can supplement your other options such as private or employer pensions.
So What is a reverse mortgage?
This is a special mortgage loan product that is designed for seniors who are 62 years or older and who have nearly or completely paid off their home loans. Basically, the mortgage company will send you a monthly payment each month until the term of the loan has been reached, at which point the loan must be paid back or the home sold.
Example of Reverse Mortgage
For example, if your home is worth $250,000, you could take out a reverse mortgage and the bank would pay you a certain amount per month. This amount is based on several factors including your age. If you live until the term of the loan is reached, you will need to sell the home in order to repay the loan, unless you have the cash to pay the loan off.
The nice thing is that if you have died, the house will be sold to pay off the loan, and even if its value has come down and the sale does not net enough to cover the actual amount of the loan, the sale effectively pays back the loan so that your children will not owe any additional money to the bank at that point. If the sale nets more than the value of the loan, the excess will be put into your estate.
If your home is paid off but your retirement funds are not equal to the task of paying your other bills, such as food and utilities, then getting a reverse mortgage is one way to use the equity in your home now so that you can live comfortably during the twilight of your life. If you have done mortgage refinance, you may not be eligible for this program unless you have paid off the refinance loan. If your mortgage loan was a bad credit loan but is nearly paid off, you should still be eligible.
If you are 62 or older and think this might be a great way to supplement your retirement, you may want to talk to a loan officer about the program works and whether or not you can qualify.