Although reverse mortgages tout the ability to age in place while also having access to some extra cash during retirement, U.S. News suggests four alternatives to seniors looking to access their home equity.
Whether or not a reverse mortgage is a good fit depends largely on an individual’s particular financial situation and the article from U.S. News Money and Personal Finance suggests that other options may, or may not be, preferable to a reverse mortgage.
For homeowners who plan to stay in their residences for a “meaningful period of time,” U.S. news suggests refinancing one’s home can help free up some cash, that is, assuming interest rates are favorable. The home will remain as an asset for the homeowner and his/her heirs, however, that national average for closing costs can be expensive—up to $3,754 for a $200,000 loan, according to recent survey data.
Home equity loans or lines of credit also enable homeowners to access their home equity, however, borrowers are required to repay interest on the entire loan amount for home equity loans, whereas with line of credit option a borrower is only required to pay interest on the amount borrowed.
Though both of these options can also preserve a borrower’s home as an asset for their heirs, failure to make the required payments puts the home at risk of foreclosure.
For those looking to downsize, selling the home to a third party also provides access to home value, which can be used to move into smaller domiciles like apartments or condominiums.
If retaining the home as an asset to be passed along to one’s heirs is important, the final suggestion provided by U.S. News is to sell the home to an adult child, or children. This option, like the others, also has its caveats.
Written by Jason Oliva