Photo by Sharon McCutcheon on Unsplash
We are now into 6 weeks of lock down and most people are seriously thinking about their finances. Whether you have a business or a job or are self employed, money is tight and our incomes have reduced so what can we do about it?
- Make a spread sheet logging all incoming money and another one for expenditure such as bills, mortgage, food, bills, car, insurance,medical fees, phone contracts and home maintenance.
- Look at ways you can reduce some of these costs, like looking for better deals for car/ home insurance, phone contracts and internet and energy providers.
- Make meal plans and shop only for necessary items.
- Talk to your bank for interest free loans, and over draft facilities.
- If you are renting see if your landlord will give you a planned holiday or let you pay in smaller installments.
- Check your mortgage and speak to your bank if you can change it or move it to a different type. There may be a few different options that you can opt for such as a reverse mortgage.
Everyone dreams about a comfortable life especially in retirement,
but if financial problems are a more immediate reality, where do you turn? A
reverse home loan is a viable solution for those who are 62 of age or above,
and in need of a financial boost.
How does a reverse mortgage work?
One of Two Ways
A reverse mortgage provided via a government
program is called a home equity conversion mortgage, but if it is supplied by a
private lender, it is known as a reverse mortgage. Both are subject to certain
government regulations, which your lender will assist you with.
Reverse or straightforward home loans?
The main consideration is the loan term. A regular
mortgage requires you to pay back the loan monthly for a predetermined period. This
regular commitment can be stressful to honor, especially if funding becomes a
problem.
A reverse mortgage, on the other hand,
allows you to borrow without having to start the repayment process straight away.
It removes the need for regular monthly payments, and you will not be bound to
any loan period. You will not need to repay anything until you ever decide to
move out of the home the loan is linked to, in which case the loan balance will
become payable.
What Are The Qualification Criteria For A
Reverse Mortgage?
The steps are simple, but the conditions
are strict. Other than being 62 years of age or older, the conditions stipulate
that you need to own and permanently reside in the house against which you take
out the loan. The lending institution where you apply is liable for working out
your capability for taking out the loan. This means that they will do a background
and credit check, to see if you can afford regular maintenance costs and
property taxes, insurance coverage, and other running costs pertaining to
home ownership.
There are also conditions linked to the
actual house. It has to be a main and permanent residence, and the person applying
for the reverse loan has to be the owner. If it is a multiple-residence
property, at least one of the homes or apartments must be the permanent
residence of the person applying for the loan. Finally, the value of the house must
be high enough to be able to cover the full repayment value of the loan upon
sale of the property. Remember that the outstanding balance on an existing home
loan will have to be settled with funds from the reverse home loan, before funds from the
reverse loan become available for use.
Life With A Reverse Mortgage
Your lender can make the money in your loan
available to you in monthly payments, which are useful for covering ongoing
bills during retirement. If you qualify, you can get your reverse mortgage
money any way you want. The other option is to make it available as a lump sum,
to help you cover costs in the case of a major expense, such hospitalization,
or you could organize a line of credit, to access it as you need.