If you are 62 or older, reverse mortgages are not the only means of accessing the equity in your home. Other solutions may be worth consideration, depending on your needs and circumstances. Here are a few alternatives to reverse mortgages.
A Home Equity Loan
A home equity loan allows you to borrow up to a certain percentage of the value of your home. The amount allowed may actually be higher than the limit for reverse mortgages. You receive it as a lump sum with pre-set monthly payment amounts. Many banks offer home equity loans without closing costs or mortgage insurance. Interest rates can often be lower than typical mortgages as well. It’s a good idea to compare this option to the costs associated with a reverse mortgage.
A Home Equity Line of Credit (HELOC)
Another of the alternatives to a reverse mortgage is a home equity line of credit. As with home equity loans, these normally have no closing costs or mortgage insurance fees. This type of loan works more like a credit line. You can receive funds up to the credit limit. As you pay down the balance, you can make additional withdrawals as needed (again, so long as it’s within the predetermined credit limit). Interest is charged based on the fluctuating loan balance. This can be a good solution if you have short-term financial needs.
Sell Your Home
Most seniors prefer to keep a family home for sentimental reasons. If you have a large home, it may not be the most economical decision to keep it. Selling the home can allow you to access its equity without paying mortgage interest and other fees on those funds. Downsizing to a smaller space can also reduce your housing expenses and utilities. Selling to a family member can allow you to remain connected to that home without the financial and maintenance burdens.
Other Alternatives to Reverse Mortgages
If your goal is to access funds to cover living or medical expenses, there may be other alternatives to reverse mortgages beyond what we’ve listed above. Perhaps you can avoid tapping into your home’s equity altogether. With the help of a financial planner and Massachusetts estate planning attorney, there may be other ways to leverage your assets to fulfill your financial needs in your senior years. Contact us to schedule a consultation.