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Five Alternatives to a Reverse Mortgage

What mortgage options are available in addition to a reverse mortgage?

alternatives to reverse mortgage

Homeowners who are at least 62 years of age can convert home equity into cash through a reverse mortgage. This allows homeowners to use the equity from their home to obtain a credit line or a fixed monthly payout. Repayment starts once the person moves out, sells the home, is delinquent in paying insurance or taxes, or passes away. Repayment is also deferred unless the house is in bad condition. The house is sold and excess funds after repayment go to the homeowner or the heirs. Are there options in addition to a reverse mortgage to help generate income for older homeowners? The following are alternatives homeowners can use instead of a reverse mortgage.

Refinance the Existing Mortgage

An existing mortgage can be refinanced to reduce the monthly payment and interest rate. Refinancing may also help in building equity for the home quickly and allows the homeowner to retain the house as an asset.

Get a Home Equity Loan

Homeowners can borrow money using the equity on their home through a home equity loan or a second mortgage. The interest is normally tax-deductible for loans of up to $100,000. Since these are fixed-rate loans, the interest may be higher compared to other types of loans. Refinancing allows homeowners to retain the house as an asset.

A Home Equity Line of Credit (HELOC)

A home equity line of credit allows homeowners to borrow an amount to the approved credit limit. Payments are limited to the amount withdrawn by the homeowner. HELOCs can be adjusted and monthly payments are determined by fluctuating interest rates. Interest is normally tax-deductible for loans of up to $100,000. The home continues to be an asset to the homeowner.

Sell the House

The house can be sold so the homeowner can access the equity it created. This is a good option for people who find their existing home to be too big or costly to maintain. The proceeds can be used for purchasing a smaller house and the extra money can be invested or placed in the bank.

Sell the House to Children

Homeowners can sell the house to their children and the proceeds can be used to rent it back from the children. The children also benefit as they receive rental income. A private reverse mortgage can also be used so fees and interest rates stay in the family. The children make the payments for the house and they can recover their investment when they sell the house. However, this situation has some effects on tax and estate planning, and you would require the help of a tax specialist or lawyer.

St. Louis Mortgage Professionals

Homeowners who are short of cash can use a reverse mortgage to generate income. It may be a good choice for people who have a good amount of home equity, but do not earn enough for their retirement.

Call Better Rate Mortgage at (314) 361-9979 to speak with a mortgage specialist.

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