HELOC or Reverse Mortgage?
Are you a senior like me? Has bills been keeping you up at night? Here are some food for thought.
There seem to be more & more alphabet soup these days. What is HELOC? Home Equity Line Of Credit works like a credit card that uses your home as security. It usually is an adjustable Mortgage based on some financial index + a margin to cover lender's cost of doing business & desired profit. There are couple of good things about it. One is you are only charged for the amount you use, and you can pay it off any time that is convenient for you. The limit is set based on your equity position in the home so generally, a much larger sum than your credit card. Plus the rate is much less than credit card. There may even be tax benefit depending on what the money is used for. Please check with your CPA to confirm this as I am not an expert on tax issues. This is my opinion is good for a safety cushion for unexpected repairs, medical expenses or home improvement if you prefer not to do a cash out refinance. A Mortgage Broker like me or a Loan Officer could do an analysis to help you determine what is best for your situation.
Reverse Mortgage is kind of the opposite of getting a mortgage on your house. This is best used when your house has a lot of equity or it is free & clear but your fixed income does not meet your day to day expenses, or to support your lifestyle. Instead of doing a cash out refinance which you may or may not qualify for the payment you would be obligated to each month, a reverse mortgage will pay you monthly an income until you sell the house or pass it on to your heirs. This gives you the benefit of your equity you've worked hard to earn & relieve you of the stress of meeting bills on limited income. Your heirs still get to inherit the house's equity and you will never have to worry about your bills again, unless you go crazy & charge up a storm. :) Just kidding. The down side of the reverse mortgage is it is an expensive loan that eats up quite a bit of your equity.
So what do you think? Is HELOC or Reverse Mortgage best for you? Need a professional analysis? Contact me and I'd be happy to help you out.