Home Equity Loan Vs. Reverse Mortgage
It is very likely that you have heard of reverse mortgage that allows you to take advantage of the home equity. Before you decide, it is important to gain all the reverse mortgage information available to understand the product and determine whether it is suitable to your needs. One of the most common questions asked by seniors is whether reverse mortgage is a better option to home equity loans.
Choosing between home equity loan and reverse mortgage is a financial decision that will be dictated by your specific situation and goals. Home equity can be converted into cash through reverse mortgage or home equity loan. Both types of loans are based on the market value of your home less liens or indebtedness that was secured against the property. However, there are significant differences that you should consider.
In the typical home equity loan, you can borrow cash in the form of lump sum or a line of credit that will not exceed the value of the home. Included in the requirements are the credit score and sufficient regular income. When you choose the option of lump sum, you will be required to make monthly payments with interests over the term of the loan. If the choice is line of credit, there are a limited number of years that allows you to draw cash. You only need to pay the outstanding balance including interest.
In reverse mortgage loans, you must be 62 years old and above with your own home that is used as a primary residence. You do not have to pay back the loan for as long as you live in the home. This option seems to be more appealing to seniors because it provides them the opportunity to convert home equity into cash without selling the property. This will provide them with financial security during their retirement life.
However, reverse mortgage is not for everybody. It makes sense to gain reverse mortgage information to carefully weigh the benefits and downsides including your specific financial needs before making a decision. It is also a good idea to discuss the option with a financial planning expert.