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ruthdelacruz | Travel and Lifestyle Blog

Ruth dela Cruz is a travel and lifestyle blogger in the Philippines. She loves writing about her travels. Drop her a note at admin@ruthdelacruz.com. The internet knew her as @ruthilicious.

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December 12, 2020

How to Navigate Your Way Through Retirement with a Reverse Mortgage

How to Navigate Your Way Through Retirement with a Reverse Mortgage

How to Navigate Your Way Through Retirement with a Reverse Mortgage 


Maybe it is odd, but it is true. As young as I am today, I am already thinking of my retirement.

I did use it as a time to do all the things you've always wanted to go and create a dream experience after a long lifetime of working, oldest assorted retiring fills you with fear and trepidation, on account of not knowing where your finances are going to come from? It is absolutely crucial to find a financial solution that works for you when you enter that phase of your life, and one of these options is the reverse home loan or retirement home loan. It is very different from a traditional loan, so before you panic let me reassure you that you need not fear an endless debt trap, and that it is fully possible to live a comfortable existence during retirement. 


Is it really that different from a standard loan? 


The short-term format of a standard loan means that you are forced into scheduled repayments of a certain amount for a certain amount of time, and this is not negotiable or flexible at all. The Conundrum of taking out a loan during retirement is that the income level of applicants tends to go down once their working lives end. For this reason, many retirees who take out personal loans do not end up in good financial shape. 


A reverse mortgage is completely different because it offers financial flexibility without demanding immediate repayment. In other words, you are free to use the funds that you have access to, in any way you see fit. 


What are the different types of reverse mortgages? 


There are two main categories when it comes to reverse mortgages. The first is the home equity conversion mortgage, which is broadly the same offering except that it is offered by government lending agencies. The second kind is the reverse mortgage, an offering that is only brought to you by private lenders. There is no real difference between the structure and function of the two kinds, except that the home equity conversion mortgage is backed and insured by the Federal Government. 


Are there any special conditions to taking out a loan? 


Because it is a loan that is specifically designed for those of retirement age, you will need to comply with the minimum age requirements which is 62 years of age or older. In addition, the home that you intend to bond to the reverse mortgage should be your legal property, and you need to be its primary and permanent resident. When you apply for a reverse home loan several aspects will be taken into account, such as the age, location, and overall condition of your house, as well as your own financial standing and creditworthiness. 


Remember that there are federal laws in place that place a cap on the percentage of the home's value that you may receive in the form of a loan. This is a mouthful. What it means is that whatever the value of your home is deemed to be cannot be lent to you in its entirety. At best, you can only receive a high percentage of that, due to legislation.