How Reverse Mortgages Originated and How One Can Assist You

How Reverse Mortgages Originated and How One Can Assist You

If retirement has you worried about limitations regarding your income, you are not alone. Many retirees have such worries. For example, how can you afford to travel or do other things you looked forward to while preparing to retire? Also, what happens if you develop an unexpected expense, like a medical bill or major necessary home repair? A reverse mortgage could be the answer.

How a Reverse Mortgage Varies from a Regular Home Mortgage

There are several differences between a reverse mortgage and a regular home mortgage. One is you can dictate how you receive reverse mortgage funds. For example, you can request the full amount you can borrow all at once or collect it in regularly scheduled payments from your reverse mortgage lender. You can even set up a line of credit against your home equity to draw from only when you need it.

Another major difference that can help you is a regular home mortgage has to be repaid in increments beginning soon after you borrow the money. A reverse mortgage does not. In fact, you are discouraged from trying to repay any portion of your reverse loan early. Also, the full balance is not due for as long as the home remains yours and you remain living in it. That means the length of the loan can be many more years than a traditional loan. During that entire time, you can experience retirement without the added financial stress of regular mortgage payments.

The Origins and Expansions of Reverse Mortgages

Reverse mortgages started out in the New England state of Maine. There, in 1961, a woman came to a local lender desperate to save her home. The lender came up with a unique solution to allow the woman to tap into her home equity while keeping ownership of the home. From there, reverse mortgages soon expanded and became popular throughout the United States. Today, special Wells-Fargo reverse-mortgages and mortgages from other major banks are common. So are reverse loans from government organisations and smaller local lending companies.

How to Know What You Can Borrow with Your Reverse Mortgage

Figuring out how much money your reverse mortgage entitles you to borrow requires the use of a special tool. It is called a reverse mortgage calculator. The reverse mortgage calculator takes into account important information like current government regulations that set limits on reverse loan amounts. Those regulations are designed to prevent unrealistic loan contracts.

What Happens to Your Home When You Have a Reverse Mortgage

It is important for your home to have enough value to borrow against. The reverse mortgage calculator can help you establish that fact. If your home is deemed suitable for such a loan, your next question may be how safe is it? The answer is a reverse mortgage is safer than a traditional loan during retirement because no payments are scheduled, so you cannot miss any. Therefore, foreclosure on your home is far less likely.

It is possible to lose your home when you have a reverse mortgage, but typically only if you file for bankruptcy or fail to meet the obligations of home ownership. For example, not paying your property taxes can result in loss of your home. Otherwise, the home is still yours and will remain so for as long as you live in it. When you leave, however, your family only retains the home if the loan balance is paid. An unpaid loan balance requires the home to go up for sale. The loan balance is paid using the proceeds or partially erased, if the proceeds are not enough to cover the balance. If there is remaining money after the loan is paid, that money goes to you or your family.

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