With all the joys of retirement, like having more time to relax and being able to do everything you’ve
ever dreamed about during your working days. Unfortunately, it also means the end of a predictable
income. So how do you approach retirement without making a massive dent in your pocket? This is
where the reverse mortgage can be very useful.
ONE OF TWO WAYS
Although the basic premise is the same, a reverse home loan can be acquired in one of two ways –
via a private lender, like a bank, or via a government agency. When you take out a loan through a
government agency, it comes with the extra peace of mind that the loan is backed and insured by
government. Other than that, there are no particularly noticeable differences between the two
AM I CAPPED ON THE AMOUNT I CAN BORROW?
Any loan comes with a set of terms and conditions that the borrower has to adhere to, and a reverse
home loan is no different. When you apply for one, you will still be obligated to go through all checks
and screenings that form part of the process. Your lender will make use of a reverse loan equity calculation tool
to assess your creditworthiness, based in several factors in your life. How old is your home? Where is it located?
Can you afford your property taxes? Is your house satisfactorily maintained? The more points you
earn on the calculator, the greater your loan amount can be.
IS IT ALL MY MONEY TO SPEND?
As soon as the loan is granted, the money becomes yours to spend. Just remember – if you still have
an amount outstanding on an existing home loan, that will be settled using funds from your reverse
mortgage, before you can access the balance of the money.
Once you take delivery of the cash that is yours to spend, you have a few options:
A line of credit means that your loan acts like a credit facility, allowing you to access the amount of money you need,
when you need it. Alternatively, you can choose to have it paid out as a lump sum, where you receive one large payment that gives you
access to the full loan total in one go. This option if useful for covering unexpected large bills, like
medical accounts. Finally, you can have the loan paid to you in monthly installments, almost like a
salary. This is the most popular option.
WHERE TO BEGIN?
You may apply for a reverse home loan from the age of 62. You have to be the legal owner and
full-time resident of your home, and the loan will only be valid as long as you live in your home
permanently. You will be expected to prove that you are able to pay all taxes, insurance and upkeep
costs relating to the property, and keep it in a good condition.