Although retirement might feel like the start of that great holiday you’ve always dreamed of, it also brings an unfortunate side effect: the end of your monthly salary. What is retirement without a bit of spending money? Everybody wants it, but how to get your hands on it without creating off the charts debt when you are supposed to relax?
Don’t complicate things
Let’s start with the basics: a reverse home loan can be acquired either through a private lender or through a government agency. The government agency option comes with the additional peace of mind of insurance from the government. There are no further significant differences between the two options, and the final choice is up to you, and a matter of personal preference.
What amount can you borrow?
A loan remains a loan, and that means that, no matter how great the outcome, you are still subject to all initial checks that precede approval. When you do your application, the lender you approach will use a tool known as a reverse-loan calculator to determine the amount you can borrow, which will be a percentage of the total value of your home. Several diverse factors are taken into account – the age of your home, its location and its physical condition. The assessment takes place through a scoring system, and the higher your score across all categories, the higher the total amount you can borrow.
Can I spend my money as I see fit?
If you apply for it, you get it, and as such, you can choose how you spend it. For your convenience, there are several ways in which you can accept the cash. There is the option to take delivery of the money in a large lump sum, where everything is paid over in one go. This would free up as much cash as you need in the event of an emergency. Another option is to accept it as a line of credit. This means that your loan acts like a credit card – you can access smaller amounts as you need them. Thirdly, you can set it up to be paid to you in monthly instalments, which mimics the pattern of receiving a salary.
When and where do I start?
The minimum application age for a reverse home loan is 62 years old, although anything above this age is also acceptable. Before issuing you with a loan, you lender will also investigate several other aspects of your life. For example, you have to be the legal owner of the home, and live in it permanently for as long as you need the loan to be valid. The property that you use in support of your application is not permitted to be a rental or a holiday property. You will need to be able to reliably prove that you can afford all taxes, insurance and other costs relating to the property, and be able to functionally maintain its condition and upkeep.
