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From sitting back and taking it easy, to revelling at your achievements over the course of your life, retirement is a concept that means many different things to many different people. However, failing to plan for your retirement during your working years is a guaranteed way to ensure that you are headed for disaster. When this happens, many people and up turning to taking out personal loans to make up for their financial shortfall, unwittingly placing themselves into yet another spiral of debt, at a time in their lives when they should be free of such things. But all is not lost – a reverse home loan could be just what you need to avoid the pitfalls of debt.
Why is it called a reverse mortgage?
Where a traditional mortgage, or even loan, will bind you to years of repayments, with eye-popping consequences should you default on these, a reverse mortgage comes with the incredibly significant benefit of not holding you to any scheduled repayments. In fact, you will not be liable for any repayments at all until the loan period comes to an end.
Of course, because is it and will always be, a loan, it is not exempt of the terms and conditions that come with a financial commitment of this nature. Some of the most basic loan terms include that you will have to live in the house against which you take out the loan as your permanent and primary residence. You will not be able to rent out the entire property for as long as the loan is active.
I want one – what do I do?
If you are not yet 62 years of age, you will not be able to apply. Remember that the reverse home loan is also known as a retirement home loan and is reserved for use by people of retirement age.
Although it comes with many benefits, a reverse home loan is still a loan from a lender, which leaves you bound to all the related terms and conditions that come with it. You credit score, a compulsory background check, your home’s condition, age and value and other factors will all be taken into consideration when your lender puts together an overall picture of your loan application.
Very importantly, you must remember that any active debts will need to be settled before your lender will grant you access to your loan balance. They will do it on your behalf, using funds from the overall kitty, and whatever is left after the debts and admin costs pertaining to the loan have been settled, will be yours to use.
How do I proceed?
There is no doubt that the terms and conditions of a reverse home loan are far more flexible and user-friendly than those of a traditional loan, but you must not lose sight of the fact that it is still a legal commitment. Defaulting on your conditions makes the arrangement legally null and void, and will leave you with no further recourse, so take great care that you remain compliant, and your reverse home loan will treat you well in return.