Are you retired, getting ready to retire, or even planning for retirement? If so, you probably find yourself short on cash, savings, or performance bonds, especially when you have surprise expenses like medical bills to contend with.
Applying for a reverse mortgage on your home is one way to get the extra funds you need. However, when you look into getting a reverse mortgage you will quickly realize learning about them is like learning a whole new language. You would probably agree.
So, let’s decode the language of reverse mortgages a bit.
Defining a Reverse Mortgage as Compared to a Traditional Loan
The most important term to understand when applying for a reverse mortgage is “reverse mortgage.” A reverse mortgage is a loan that provides you with money on a long-term basis.
When you obtain one, you owe no funds back for a very long time. You also get to maintain ownership of your home.
Since you have no set repayment schedule requirements, you can spend the money however you want or need during retirement without adding additional financial strain to your already tight budget.
If this is something that you feel uncomfortable with or need help with, talk to people who have been through it and always have a lawyer on your side such as https://www.goulartlawyers.ca/
What a Reverse Mortgage Lender Is
A reverse mortgage lender is the company from which you obtain the reverse mortgage. For example, a local bank or credit union can be a reverse mortgage lender.
However, there are also reverse mortgages offered by other sources. For example, you can get a reverse mortgage offered by Wells Fargo or another nationally-known lending institution for added security.
Doing so can help you avoid falling victim to a reverse mortgage scam. You can also be secure in the knowledge the lending company is unlikely to shut its doors if it is a large, well-established institution.
Learn more at BluMortgage.
The Meaning of Home Equity
It is also important to understand what home equity is when applying for a reverse mortgage. Home equity is essentially the value of your home. However, there are different aspects of home equity. For example, your home might have a total value, but that value is not necessarily the total you can borrow.
If you have a traditional mortgage already, that is one thing that detracts from the total available equity. There are also regulations preventing you from borrowing the total equity available. Instead, you receive a percentage of it.
You may also enjoy reading Investment Strategies for Middle Income Families.
What a Reverse Mortgage Calculator Tool Is
Another term you may here is “reverse mortgage calculator.” You need to be able to calculate how much you can borrow when getting a reverse mortgage. The tool that helps you do that is the reverse mortgage calculator. It is able to determine the value of your home and percentage you can borrow based on established formulas.
What a Home Equity Line of Credit Is
A home equity line of credit is similar to a credit card in terms of function. When you ask your lender for a home equity line of credit it means you can borrow money as you need it. However, there is a total cap, or maximum amount, set that you can borrow.
A home equity line of credit is one of several ways you can borrow reverse mortgage money. Other common ways to borrow are requesting equal monthly payments from the lender or asking for one large payment.
Home Equity Conversion Mortgage Versus Reverse Mortgage
Another term you may hear when applying for a reverse mortgage is “home equity conversion mortgage.” A home equity conversion mortgage, or HECM, is almost the same as a reverse mortgage. The difference is an HECM is offered by a government organization.
Therefore, it is government-insured. A regular reverse mortgage does not have the same government backing. Although, it is still subject to certain government regulations.
So, what are your thoughts? What stuck with you from this post?
