If you have been watching, reading or listening to advertisements recently then you have probably heard about a financial tool known as the reverse mortgage. Just the name alone raises a number of questions. Most of us understand what a mortgage is but what exactly is the reverse of a mortgage. Simply put, when you are paying your mortgage you are buying your house and building up what is known as equity. You are giving your lender’s money in return for this. When you reverse the process you get lenders giving you money in return for your equity. Simply put you are getting money loan to you based on the value of your home and all of the payments you have ever made on it.
So who exactly are these reverse mortgages for? The main thing you have to consider is that these mortgages only go to people who have mostly pay off their home or who have completely paid for. As you can imagine most of those eligible older. In Australia, for example, you have to be over at least 60 to be eligible for one of these loans, and in some cases you need to be even older than that. The main people who benefit from the sort of loan are those who want money by mortgage broking Burwood, don’t have a job and plan on staying in their home for the rest of their life. When you lay out these facts it’s easy to see why the average person taking out one of these loans is a retiree.
How much exactly will you get when you take out one these loans? Like any other loan that depends on a number of factors. The biggest thing is how much your home is worth and how much of it paid off. Generally speaking you will never get more than half of the value of your home, although the average reverse mortgage is much less than that. One interesting aspect of the sort of loan is that when you first hear about one of these mortgages you might find yourself asking why more people don’t get them. Who could use more money after they retire? You always have to remember that no one gives you money for free. The lender still expects to be paid back and will also want to make a profit. Never think about a reverse mortgage like it’s free money. While there may be little risk involved for you if you pass away before paying off this loan then the debt will be transferred somewhere else in your family. That’s why you have to be smart when developing mortgage strategies to mitigate any risks.
Every sort of mortgage requires careful planning and long-term thinking. Financial that should not be taken lightly. But with all of this said if you do your research you may find that a reverse mortgage could be right for you. You have dreams and you need money to make those dreams a reality. Whether it’s something grand or as simple as improving your quality of life you need the right wealth creation tool to achieve your goals. For many people the right tool has been a reverse mortgage, and it might be right for you too.