It is undeniable to say that keeping cash flow steady in a business is easy. We aren’t sure if it is because of industry trends, seasonal fluctuations or economic crisis, yet most business’s experience it. Having the backup systems that we had in the past are becoming harder and harder to get, like loans, lines of credit, credit cards and savings accounts.
A reverse mortgage is another way that you can get some money from your own home, condo, manufactured building to create a consistent cash flow that can give you the back up you need, for the assurance you deserve. If you find that you fall under the requirements necessary to obtain one, it might be your next system solution for the strained cash flow positions you find yourself in from time to time.
With a reverse mortgage, you have a valuable tool available that can be utilized as part of your strategy in financial planning. Unlike other types of loans or credit systems, there are many features of reverse mortgage loans that can benefit. So what exactly are they?
#1 You remain the owner of your home
A common misconception of reverse mortgages is that the lender takes ownership of your home. This is false. You continue to maintain ownership of your asset, as long as you comply with the terms of the loan and pay your taxes and insurance.
#2 There are no monthly mortgage payments required from you
One of the most attractive benefits of reverse mortgages is that payments are made to you, as long as you own the building. This is quite different from a traditional forward mortgage where you must pay funds in a monthly amount. With reverse mortgages, you receive funds. The loan is repaid when you sell.
#3 You are protected if the real estate market declines
Mortgage Insurance is an insurance policy which compensates lenders or investors for losses due to the default of a mortgage loan. Mortgage insurance can be either public or private depending upon the insurer.
The reverse mortgage loan is insured by the federal government. With federal insurance comes greater security. If the loan ends up amounting to more than the value of the home when sold, government insurance will cover the difference. This means that the loan will be paid in full using only the proceeds your home sells for, and no more.
#4 You may choose from several options of disbursement
Each individual senior has different needs. Thus, there are different disbursement options to cover different needs. This includes the choice to receive funds in a full or partial sum, a line of credit, monthly payments, or a combination of any of these.
The money from a reverse mortgage can be distributed in four ways, depending on the borrower’s financial needs and goals:
- Lump sum in cash at settlement
- Monthly payment (loan advance) for a set number of years (term) or life (tenure)
- Line of credit (similar to a home equity line of credit)
- Some combination of the above