Consider all of your alternative choices prior to making a final decision to take out a reverse mortgage or HECM loan.
Reverse Mortgage Alternative Ideas
Before taking out a reverse mortgage, it is important to consider your alternatives. Reverse mortgage loans are complicated lending instruments. In most cases professional counseling is required. Below are several ideas that you may want to consider before you make your final decision.
- Selling Your Home - This can be a very hard decision for a senior. Often, the homeowner is very attached to the house and cannot imagine leaving behind a lifetime of memories. Sentimental emotions as well as the cost of selling (real estate commissions, closing costs, and then more expenses associated with buying a new place and moving) have to be taken into consideration. But how do you quantify the value of memories?
- Taking in a Boarder - If you have an extra bedroom, you could take in a boarder to help with expenses. By providing housing for the boarder, you are helping him / her out as well. It could be a win-win situation for both parties.
- Home Equity Line of Credit - If your home has significant equity, you may be eligible to take out a home equity line of credit. These loans are very inexpensive as compared to a reverse mortgage or even a conventional first mortgage. You will only pay interest on the principal balance that you use. If you use the credit line only for unexpected shortfalls, this option could be very cheap. But you have to qualify and you have to make monthly payments.
- Traditional Conventional Mortgage - Taking out a new first mortgage could give you enough money to meet your needs. The benefits of this option over the home equity loan is that you could get a low fixed interest rate and set payments. If you need a large sum right away, this might be cheaper than a home equity loan over time. But again, you have to qualify with your income and credit
- Part-time Work - If you only need a few hundred dollars a month to fill in a cash flow gap, consider taking on a part time job. During your career, what were you hobbies and interests? Maybe you can find a part time job related to something you love to do. This option would fill in the money gap and might also be fun. You may make a new friend along the way.
- Government Assistance - Make sure you contact your local, state, and federal government offices to see if there are any government programs available to you. One option to look at might be SSI (Supplemental Security Income).
Your counselor will likely acquaint you with other options to reverse mortgages, help you understand disclosures, and select the right product. There are many ways to accomplish the goal of finding extra money. Your financial circumstances and the amount you need are big considerations when choosing financing if you're 62 or better.
Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.