A person who buys a home when they're just eighteen years old will spend many years paying off the loan to own that home. When that person reaches their sixties, they may be able to take out a reverse mortgage using the equity in their house and receive a lump sum or ongoing income.
This equity can then be used as an income stream or as collateral for borrowing money for personal lifestyle needs such as home improvement projects, post-secondary education, medical bills, or to pay for services related to assisted living or senior care.
How Does It Work?
A reverse mortgage is different from a conventional mortgage in a few key ways. First, instead of making regular mortgage payments, people with a reverse mortgage only have to worry about making payments once they sell their house or when they move out or pass away.
Meanwhile, the lender is free to add the interest onto the loan balance, and the balance can be paid off with the proceeds from the sale of the property. A traditional mortgage requires income, while a reverse mortgage doesn't.
When it comes time to pay off any remaining balance due, people can opt to liquidate the property and use all of the cash to pay off their debt.
The Benefits of Using a Reverse Mortgage to Fund an Accommodation Payment
If you choose to keep your family home, you can pay the loan off through periodic payments. This is also an option if you can't afford the purchase outright.
The benefits of paying off the loan through periodic payments include saving on interest charges from the nursing home, as their minimal interest rates are lower than those charged by banks for the same loan amount.
You could also choose to make those payments directly to the nursing home. Although this option incurs more interest charges, it also helps relieve your cash flow issues while you remain in your home.
Eligibilities for a Reverse Mortgage
To get a reverse mortgage, you generally need to be at least 60 years old, use the home as your primary residence, and not be renting it out. Most lenders will not offer a reverse mortgage until you are 65 years old. You'll also need to provide proof of income, including whether you are currently working or not. If you are on a pension or receive Social Security, then you may qualify for a reverse mortgage.
The lenders then assess whether you're likely to remain in the home until the end of your life or until the property is sold. If you're already in a facility at the time of your application, then you're likely to be approved for the reverse mortgage.
The application process can be long and arduous, so it's a good idea to have all of your documentation in order. Also, applying for the reverse mortgage early on can help ensure that your application is processed in a timely fashion.
Conclusion
Reverse mortgages may not be everyone's cup of coffee; however, they can be an excellent solution for mortgaging your house. As with many things, it's important to do your research and to ask questions.
In many cases, the reverse mortgage can enable you to pay less interest than you would pay on a standard mortgage. This is because you'll only have to repay the loan when the property is sold or when you move into a care facility.If you are looking for the best reverse mortgage solutions in Sydney, look no further than our experts here at Wealthy You. We are an Australian Mortgage Company servicing Sydney for almost a decade, and because of this, we can offer you a variety of mortgage solutions to meet your specific financial needs. Call us today and let us discuss all your available mortgage options.
