Living in your early sixties may face you with some major decisions. You have to decide whether to continue working or to live in a land of retirement. You may also be indecisive about your current living situation. You may be considering turning your current mortgage into usable funds by applying for a reverse mortgage. A reverse mortgage may seem like a good and easy way to have money, but the disadvantages may outweigh the advantages of going through the process. Luckily, there are other options you can choose that overshadow taking out a reverse mortgage. Keep reading for other options to a reverse mortgage.
What is a Reverse Mortgage?
A reverse mortgage is the type of mortgage gives you the chance to borrow funds that go against your home’s equity to get a certain payment or credit. All payments are then deferred and do not have to be paid back until one of the following events occur:
- The homeowner permanently moves out of the home.
- The homeowner places a price tag on the home and sells it.
- The property taxes or the insurance is in a delinquent state.
- The home becomes damaged and unable to be repaired.
- The homeowner is deceased.
The process in taking out a reverse mortgage can be a very long and tedious process that must be done correctly to even be eligible to receive the loan. Ultimately, you may find it more beneficial to find other ways that are a substitute for using a reverse mortgage for financial help.
Alternatives to a Reverse Mortgage
You may have to research more on reverse mortgages to decide if that is the best thing for you to do. However, if you have concluded that a reverse mortgage is not the best for you, or you would like to explore other options, here are a few you can consider that may be more beneficial for you.
· Refinancing Your Current Mortgage.
One option to consider instead of a reverse mortgage is refinancing your current mortgage. Refinancing can give you lower interest rates on your mortgage and give you lower mortgage payments, which can essentially save you money overtime.
· Applying For a Second Mortgage.
A second mortgage or a home equity loan is another option to consider instead of a reverse mortgage. With a second mortgage, you are given a big sum of money and you cannot take out any extra money once the amount has been given. The interest paid on these loans is eligible for a tax deduction as well. The loans are typically given on a fixed rate that cannot be changed regardless of the increase of interest rates. For that reason, the interest rates of these loans are usually high.
· Applying For A HELOC.
An HELOC is a home equity line of credit. This gives you the opportunity to borrow a specific amount of money and is given on a needed basis. With the HELOC, you only have to pay interest on the money that you take out of the account once the loan is given. These loans are given adjustable interest rates and payments, and the interest can be used as a tax deduction as well.
· Selling Your Current Home.
Another option to a reverse mortgage is to sell your current home. The earnings from your home can assist you in downgrading to a smaller home and give you extra money in your pocket. If you decide to move, make sure your new living environment will benefit you more financial that it would have to stay in your current home.
· Keeping Your Home in the Family.
Another option to consider is selling your home to your children or another member of your family. You can incorporate the method of selling your home, then renting it back by using the cash you just earn from selling the home. This is called a sales-leaseback agreement. You will be able to rent the home to your family members, essentially becoming their landlord and taking the benefits of tax deductions.
· Applying For a Private Reverse Mortgage.
A private reverse mortgage is similar to a regular reverse mortgage. The only difference is that the interest and fees stay within the family. Whoever lives in the house will take care of the payments and will receive the contributions whenever the home is sold. To set up this arrangement, you may have to pay some money, but it will turn out to be a bit cheaper than it would be if you were to take out a reverse mortgage.
When you hit your early sixties, you may be faced with the possibility of applying for a reverse mortgage on your home. If you are considering the option, make sure that a reverse mortgage is the best decision for you to make. Do your own research or consult a mortgage specialist with questions to help you make the decision. You may discover that the alternatives to a reverse mortgage are a better fit for you and your current situation.