A reverse mortgage is an important financial tool that many seniors implement into their retirement plans. It can help to supplement your retirement income, consolidate debt, or even set aside funds for an emergency. However, there are occasions where a reverse mortgage may not be the answer. It is important to understand your options and consider the alternatives before you take out a loan.
Other options may be a better solution for your current situation.
Selling or Downsizing
If you’re not interested in keeping the home you are currently living in, leaving your home to your heirs, or wanting to age in place, then selling your house may be an ideal solution.
If it’s additional cash flow you’re looking for, then refinancing your existing mortgage may lower your interest rate and substantially reduce your monthly mortgage payments. Some have decided to refinance to lower their loan term and pay off their mortgage faster or to get cash out on their equity. Remember, if you refinance your current mortgage, you will still have a monthly mortgage payment.
Home Equity Line of Credit (HELOC)
HELOCs allow you to borrow against the equity you have built up in your home with options that are like credit cards. With a HELOC, you can take out different amounts as needed, for a specified limit, and will make payments to restore your borrowing limit.
Home Equity Loan
A home equity loan allows you to borrow against the value of your home, with the terms being similar to a traditional loan. A lump sum is distributed, and you pay off the loan in monthly installments. This option that many choose when handling large, one-time expenditures.
Personal loans normally have higher interest rates than home financing options. However, since they can be unsecured, no collateral is required.
Retirement Savings and Social Security Benefits
If you haven’t retired yet, there may be a benefit consulting with your financial advisor and appropriate government agencies to understand what options are available. You may be able to borrow funds from your 401(k), take out an early distribution, or choose to defer certain benefits. Some options may be penalty-free, while others might be viable solutions to reach your financial goals. Don’t be afraid to ask questions, you may discover ways to receive money that is justly yours.
If you’ve considered these alternatives and think a reverse mortgage may be the answer, talking with a licensed loan officer is a great next step. You can receive a personalized loan assessment by calling 1.800.976.6211 or see how much you may be eligible for by using our reverse mortgage calculator.