Reverse mortgage alternatives
If you need money in retirement and don’t want to sell your home, a reverse mortgage isn’t your only option, and some options may be less expensive. Here are a few possibilities:
- Home equity loan: Borrow a lump sum at a fixed interest rate and return the loan in fixed monthly installments for up to 30 years. When you know how much you need to borrow and keep your current mortgage, home equity loans provide stability and certainty.
- Home equity line of credit (HELOC): A type of loan that allows you to borrow money against your home’s equity. Borrow lesser quantities against the value of your property as you require them over several years. You may be able to make small, interest-only payments on a home equity line of credit throughout the draw period. During the repayment period, you will repay the principal plus interest. A HELOC’s interest rate is changeable.
- Cash-out refinance: Refinance your existing mortgage, and then some with a cash-out refinance. A cash-out refinance may be a viable option if mortgage refinances rates are lower than the interest rate you now pay.
The potential disadvantages of these three options are that none of them will be available if your home is worth less than what you owe. To qualify for a conventional cash-out refinance on a single-unit primary property, you must have at least 20% equity in your house after receiving the new loan.
If you’ve evaluated all of your options and have decided on a cash-out refinance, be sure to shop around and compare rates with several lenders. With Credible, you can accomplish this quickly and effortlessly, and you’ll be able to check your pre-qualified rates in just three minutes.
