For a lot of people, a home where they reside is their largest single investment. What most people do not realize is how to use this investment of equity in their house to fund their retirement. A reverse mortgage loan is a home loan available only to those 62 years or older. Unlike normal loans, this kind of loan has no monthly repayments. Payment is referred until the person dies, transfer ownership of their house or failure to pay insurance or tax. Additionally, if you fail to keep the house in a good shape or happen to move out, payment of the loan can be deferred.
With a reverse mortgage, you don’t need an income. However, the interest charged is added to the outstanding loan balance every month. This means that one may end up owing more than the house’s value. Here are some top alternatives to reverse mortgages.
Refinancing an existing mortgage
If you are struggling to repay your monthly installments, you may choose to refinance your existing mortgage to free up some money. This also lowers your monthly payments. Furthermore, refinancing lowers the interest rate on your mortgage which can free up some money over your loan repayment period. Additionally, you get to retain your house.
Home equity line of credit
HELOC allows you to borrow up to your approved credit limit on a needed basis. With a HELOC, you only pay interest on the amount you’ve withdrawn. Being adjustable loans, home equity line of credit only uses your home as collateral and could be foreclosed if you fail to repay.
Home equity loan
A home equity loan allows you to borrow money by leveraging your home’s equity. It works exactly like your primary mortgage as you’ll only receive a one-time payment.
If your current home is too big, you can sell it and use this equity for your retirement needs. You can now buy a smaller house and invest as needed.
Before opting for a reverse mortgage loan, it is important to learn the basics involved and what collateral is required. Talk to a mortgage company in Salt Lake City such as American Loans to find out the best options available for you.