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Newer ways of taking care of both present needs and retirement are here!

reverse-mortgage

As we start earning, we focus on buying newer things that we need and then those which we desire for. But as we grow older, we understand the importance of savings. Once we retire, we will not have a consistent earning and the monthly expenditure has to be met by a certain source of income. Unfortunately, pensions have been stopped by governmental authorities so that the social security of individuals after retirement is in crisis. Looking at the situation, many start saving at an early age nowadays.

Can savings take care of retirement planning?

When we try to save, we also come across the need to buy a home, a car and fulfil other things that are required in the present. Amidst the confusion between the future and the present, the savings also tend to drain out. Thus newer and innovative schemes have arrived that take care of the present as well as the future. Reverse mortgage is just one of them.

When one buys a home, s/he has to mortgage the house to a bank or a financial institution for the home loan. Till now, the new house remained as a safety measure in case the loan could not be repaid. With newer schemes, the house that was kept for mortgage can become a source of income after retirement. In this scheme, the bank or financial institution which had authorised the loan will start giving returns on the mortgage that was kept after the home loan is returned completely. This return will start off after one attains the age of retirement.

How can the return be affected?

The return on the mortgage can come in three forms:-

  1. Lump sum return.
  2. Monthly income.
  3. Line of credit.

Most of the salaried individuals would prefer to go for option two unless they have a plan for reinvestment in which case they may choose option one. In this case, they can take away the lump sum amount and reinvest in any other scheme for higher returns. The third option generally goes to the individuals who are not solely dependent on this money and may thus need a credit for investment in a running business every now and then.

Mortgage thus becomes an asset

Mortgage used to be a hateful word since the property under mortgage could not be reused until the loan was over. Now, it is no more so. The Reverse mortgage idea is selling like hot cakes especially among the younger investors who are free to understand this new concept and the allied benefits that one may apparently not be able to visualise.

In order to go ahead for a novice with such schemes, it is important to:-

One should have the information that is true and the best in order to start with, followed by proper counselling to choose from the numerous similar schemes available, apply the knowledge to make the best of investment, appraise self about the benefits and hidden costs, and finally process a loan with a Reverse mortgage.