If you are single, over the age of 62 and are struggling with your retirement plan and you own your own home, you can actually take out what is called a reverse mortgage to get things back in order.
Before you read any further, you will want to carefully consider whether you want your estate to be encumbered by a loan after your passing. This quick breakdown will offer you some basic information about reverse mortgages that you can use to determine whether or not this is a plausible solution for meeting your retirement needs.
What is a Reverse Mortgage?
A reverse mortgage is designed to help those who own their home pull cash out when they need it during their golden years. There are some basic requirements, however. You have to be 62 years of age or older and have your home mostly paid off with a decent amount of available equity to be considered for these loans. Not everyone qualifies. Further, you must be a primary resident of the home to qualify.
How Does it Work?
Let's say you take out a reverse mortgage. Your equity is assessed during a home appraisal to determine what amount that you can borrow. The banks will then draw up the paperwork and refer you to a credit counselor (mandated before you can take the loan out). Once you are apprised of how these loans work, you can choose to take one out.
Unlike conventional loans, however, reverse mortgages work a little bit differently. In this borrowing scenario, your old loan is paid off and a new loan is issued; a lien is placed upon your house in the amount borrowed. The loan does not get repaid until after you have passed away. When this occurs, the house is sold and the lien and any interest and fees are paid off. Any remaining funds become property of your estate and are disbursed according to your last will and testament.
Does A Reverse Mortgage Make Sense for You?
If you meet the aforementioned requirements and are struggling with your retirement, then yes, a reverse mortgage is a smart consideration. However, if you have plenty of money coming in and would prefer to preserve your estate, you may have other options that you want to consider first. With statistics showing that most older Americans struggle the most during retirement, it's comforting to know that you do have options, should you need them, with a reverse mortgage.