Does a Higher Home Price with a Reverse Mortgage Benefit?

By August 11, 2020

A reverse mortgage loan is a financial product introduced to fulfill the funding needs of senior citizens. Typically, it is a repayment-free credit option that does not involve interest accrual. The sanctioned loan amount is thus recovered in full only in the case of a borrower’s and his/her spouse’s demise or if the borrower moves out of the residential property permanently.

It must be noted that by reverse mortgaging a residential property, borrowers receive payment from the lender. The amount sanctioned depends on the property’s equity value and is disbursed – in a lump sum, annually, quarterly or monthly.

Besides, borrowers’ age also plays a significant role in it. If at any time, the price of the property increases, borrowers can utilize such appraisal in value in their favor to increase the amount of reverse mortgage loan. Alternatively, he/she can resort to other methods to benefit from such appraisal.

How to benefit from the price appraisal of a reverse mortgaged property?

Here are a few practical ways in which borrowers can make the most of an increase in their property value under the reverse mortgage mechanism.

  1. Borrowers can refinance their existing mortgage

By opting for a property refinance, borrowers can avail an increased credit amount. It can help them meet other big-ticket financing needs planned for but lacking sufficient funding.

In that case, they can choose to refinance their loan from a new lender offering better terms like choice of payment options, co-application, etc. Nevertheless, refinancing also comes with a cost to the borrower. One must thus consider the charges involved before going for a refinancing option.

  1. Avail a higher loan amount

In case the property price appraisal is higher than expected, one can apply for the full amount they are eligible for with their existing lender. On the other hand, if it is less than expected and a price appraisal is expected in the near future, borrowers can wait for a few years until the value increases.

  1. Use the proceeds to pay off the primary debt

Borrowers can also resort to repay the loan amount with proceeds from the auctioned property in the case of property value appraisal. In that case, they would thus be left with additional funds at hand for utilisation even after repayment of the existing loan.

The fact that borrowers can use the proceeds much like the loan value to meet any sort of requirements makes it flexible to use. Borrowers must thus re-evaluate their property at periodic intervals to gain a better idea about its market valuation. They should also find out about how to maximise its benefits.

Intending reverse mortgage loan borrowers can benefit in the ways mentioned above and more by applying for it when in need of regular funding. Consequently, they should become familiar with all requirements when availing the advance, including – the eligibility criteria and application procedure.

Eligibility criteria

Usually, the eligibility criteria set for applicants may vary from one financial institution to another. Some common ones are as follow –

  • Must be at least 60 years of age.
  • Must have a residential property with a minimum 20 years of ownership.
  • Married couples can co-apply for the loan given that at least one of them is 60 years of age while the other is not below 55 years.

Nonetheless, before settling for a particular loan type, individuals should also explore other credit options like a loan against property. It will help them to understand which mortgage option will prove more beneficial in the long run.

For instance, it will simplify doubts pertaining to how to get out of a debt trap using a loan against property or other loan options.

Application process

Individuals can avail a reverse mortgage loan online by following these simple steps.

Step 1 – Visit the official website of the lender.

Step 2 – Navigate to ‘Reverse Mortgage Loan’ option.

Step 3 – Click on the ‘Apply Now’ button.

Step 4 – Provide essential information to fill the application form.

Step 5 – Review the details provided and submit.

It must be noted that the application procedure can differ with the lender selected. Consequently, applicants must find out about all additional requirements beforehand.

Similarly, individuals who intend to avail alternative funding like a property loan should find out how to apply for a loan against property. Typically, some financial institutions provide quick and hassle-free applications online.

They also provide customers with pre-approved offers to make the experience of availing credit simple and time-saving. Usually, such offers accompany financial products like loans against property and home loans. Check your pre-approved offer by entering your name and phone number. As for reverse mortgage loan borrowers, they can refinance their loan, borrow a higher amount or repay their primary loan when the value of their property increases. They must also have a proper financial plan in place before initiating any of the options.

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