Who Should Consider Home Equity Conversion?

If You Need to Take Cash Out of Your Home, You Should Consider a Home Equity Conversion

Home Equity Conversion should be considered by anyone needing to use their home equity to augment retirement income. If you are considering a Reverse Mortgage, Downsizing or a Home Equity Loan in order to get cash out of your home, you may also want to look at Home Equity Conversion. (For more information comparing the advantages and disadvantages of these various home equity solutions, see Comparing Home Equity Solutions.)

Home Equity Conversion can be used by almost anyone for almost any purpose, including:

Reducing or eliminating debt (pay off mortgage, credit cards, etc…)
Purchasing a lifetime annuity to guarantee adequate income for the rest of your life
Purchasing long term care insurance
Buying a vacation home or recreational vehicle
Paying for out of pocket medical expenses
Funding children’s college education
Financing a dream vacation
Augmenting retirement income
Etc…

Who Qualifies for Home Equity Conversion?

Different Real Estate Investment Companies will have different requirements. In general, however, there are a few minimal qualifications listed below:

Currently only residents of single-family detached houses in California, Colorado, Connecticut, Florida, Illinois, Massachusetts, Maryland, New Jersey, Oregon, Pennsylvania, Virginia and Washington are eligible. But, more states will be added over time.
The current value of your home must be at least $450,000.
You must have an average or higher credit score.
Depending on the Real Estate Investment Company, your home may not be valued in the top or bottom 10 percent of your local market.
Some Home Equity Conversion products have age and health restrictions, but others do not.
In most cases, your mortgage debt may be up to 75 percent of your home’s value at the time you enter into the agreement, depending on the terms for your specific property.

Timing of Home Equity Conversion

In real estate they say that location is everything. With Home Equity Conversion, timing may be everything. Over the last 10 years, real estate has seen unprecedented appreciation. This is good news for home owners considering Home Equity Conversion.

In most cases, you have probably already seen a tremendous increase in the value of your property. And, with Home Equity Conversion, that money is all yours. You are only agreeing to share the future change in value of your home. The Real Estate Investment Companies do believe that residential real estate is a good long term investment and that building a portfolio of investments in homes across the country has a better chance of appreciating in value than investing in only one home or region. Whether or not prices will rise at the same pace as they have done recently is, however, uncertain.

Is Home Equity Conversion right for me?

If you need to use your home equity to fund retirement expenses, you should compare options such as: Reverse Mortgages, Downsizing, Home Equity Loans and Home Equity Conversion.

Home Equity Conversion may be of particular interest to homeowners who believe that home prices will remain flat or fall over the next few years. Because some Real Estate Investment Companies will share in the downside (as well as upside) in the price of your home, Home Equity Conversion is one way to hedge against a falling real estate market.

Do You Need to Remain in the Home for a Certain Period of Time?

In most cases it would be wise to remain in your home for at least five years to avoid extra costs that could be charged by the Real Estate Investment Company. However, you may be able to transfer your Home Equity Conversion Agreement to your new home if you are selling and buying elsewhere.

In most cases Home Equity Conversion agreements are good for whatever amount of time you choose to retain ownership of your home – up to 40 or 50 years.

Best of all, the costs of securing a Home Equity Conversion are minimal when compared to the costs associated with Reverse Mortgages or Downsizing.