Whether you’re already retired or are about to retire, you’ve likely made some preparations ahead of time as it is a major step in your life. However, the cost of living and expenses keep rising as the years go by, which mostly results in people struggling financially despite approaching retirement. With all that preparation and savings you’ve done, it may not always be enough.
American Mortgage Solutions is here to offer a solution that not many people are actually aware of. There is a thing called a reverse mortgage that might just be what you need to start your retirement in a more comfortable financial state.
What Is a Reverse Mortgage?
In its simplest form, a reverse mortgage is a loan that allows homeowners, age 62 and above, to convert a portion of their home equity into cash. This is an excellent way for people to supplement their retirement funds without making monthly mortgage payments.
How Does a Reverse Mortgage Work?
Whenever you apply for a reverse mortgage, you are practically using a portion of your home equity to pay off the existing mortgage on your home if you still have a remaining balance to pay. With reverse mortgages, the borrower doesn’t need to pay monthly mortgage payments as the loan balance isn’t due until one of these three things happen to the borrower:
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- Passes away
- Neglects to maintain the home
- Fails to pay taxes or insurance
One disadvantage with this type of loan is the amount the homeowner owes to the lender goes up over time instead of decreasing. This is due to the fact that interest and fees are added to the loan balance each month. As your loan balance increases, your home equity decreases.
What Are the Risks of Applying for a Reverse Mortgage?
A reverse mortgage pretty much has the same risks as applying for any other mortgage loan. However, you need to be wary of a lot of contractors with predatory lending practices. Those contractors may approach you and offer you a reverse mortgage loan to pay for your house repairs. This is more likely to be a scam.
Some contractors also prey on senior veterans that may be interested in taking a reverse mortgage loan. However, the Department of Veteran Affairs (VA) does not offer any reverse mortgage loans. There are contractors who falsely advertise very promising deals for veterans offering a “no-payment” reverse mortgage loan to rip-off older veterans who may be desperate to stay in their homes.
What Can a Reverse Mortgage Be Used For?
Whether you need financial assistance or just want to have a bit more funds while you live your retirement, there are several possible reasons to go for a reverse mortgage. These include:
- Eliminating or lowering monthly payments
- Consolidating debts
- Pay for in-home care
- Make some home improvements
- Supplement your income to allow other assets to grow in value
- Create an emergency fund
- Increase your savings
- Protect your home equity from declining home markets
Whatever your reason is, a reverse mortgage could be just what you need for your retirement. If you’re sure you need the money from it, contact a reputable lender to help you get what you need.
Conclusion
Finding a mortgage broker you can trust has never been easier with the help of American Mortgage Solutions. We offer a fast and straightforward way of finding you the right loan products no matter what your situation is. From home buying and refinancing to reverse mortgages, we help you find the right solution for your needs. Contact Florida office at (239) 766-8344. We also have offices in Louisville, Kentucky. If you would like to reach us there, you can give us a call at (502) 327-9770 to get started.
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Most people don’t... Find out in 10 minutes.
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