While those 62 or older may opt to convert the equity in their homes into cash with a reverse mortgage, Investopedia details five “top alternatives” to the reverse mortgage product in a recent article.
“Home equity loans can be problematic if not done correctly and require careful attention to the rights of the surviving spouse, if you are married,” Investopedia says. “And of course, the end of the process means you or your heirs give up your home.”
Five ways to tap into one’s home equity rather than taking out a reverse mortgage include: refinancing one’s existing mortgage; taking out a home-equity loan, “essentially a second mortgage;” taking out a home equity line of credit (HELOC); selling one’s home to possibly downsize; and selling the home to one’s child or children.
Selling a home to downsize might be appealing to folks whose current residence is too big for their current needs, too difficult or costly to maintain or has prohibitively expensive property taxes.
In addition, one approach to selling the home to a child or children is a sales-leaseback agreement, Investopedia says, noting that the agreement entails selling the home then renting it back using the ash from the sale.
“As landlords, your children get rental income and will be able to take deductions for depreciation, real estate taxes and maintenance,” Investopedia says.
Read the article here.
Written by Cassandra Dowell