Five alternatives to a reverse mortgage

Five alternatives to a reverse mortgage

December 20, 2016
alternatives to a reverse mortgage
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A lot of seniors over the age of 62 choose to convert the equity in their homes into cash, with the help of reverse mortgages. This way, they can borrow against the equity in their homes, to get either a fixed monthly payment or a line of credit. And they don’t have to pay anything until they move out, sell their homes, they don’t pay their taxes or insurance, the homes fall apart or until they die. This may sound like a good deal, and it’s true that a reverse mortgage can be very helpful, but you should know that there are other ways to tap into your home’s equity.

You can refinance your existing mortgage

If you have a loan, you can refinance it to lower your monthly payments and free up some cash. Lowering the interest rate on your mortgage is one of the best reasons to refinance. It can save you a lot of money over the life of your loan. And if you refinance instead of getting a reverse mortgage, your home will still belong to you and your heirs.

You can sell your home

If your house is too large for your current needs, if it’s too costly to maintain, or if you just want a change, you can sell your home. This will give you access to the equity you have built, and you can use that money for anything.

You can sell your home to your children

Sign a sale-leaseback agreement with your child and you won’t regret it. As landlord, your child will get rental income and will be able to take deductions for depreciation, real estate taxes and maintenance.

You can take out a home equity loan

This is essentially a second mortgage. Home equity loans let you borrow money by using the equity you have in your home. Just like a primary mortgage, it allows you to get a single lump-sum payment, and you won’t be able to draw any other funds from the house. The interest is tax deductible for amounts up to $100,000.

You can take out a home equity line of credit

A HELOC allows you to borrow up to your approved credit limit. You can withdraw the money whenever you need it. And you will only pay interest on the amount that you withdraw. HELOCs are adjustable loans, so your monthly payments will change as interest rates change.

The bottom line

There are many alternatives to a reverse mortgage. But, remember, if you want to make sure that you choose the best option for you, you have to do your research first and figure out exactly what you need.


Thomas Hookton is a finance journalist, history buff and science fiction connoisseur. Hit him up via email.

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