As you know, some seniors turn to reverse mortgages as a way to fund retirement, free up monthly cash-flow, or buy a new home.
But reverse mortgages also come with pros and cons such as ongoing responsibilities of homeownership, upfront costs, or the drawing down of home equity over time that leaves less inheritance for reverse mortgage heirs.
Sometimes it makes sense to pursue other options, ranging from getting a housemate to downsizing to taking out a different kind of home equity loan.
Read on for the five best alternatives to getting a reverse mortgage:
1. Move to a less expensive location
This may seem like a bit of a no-brainer, but consider moving to a state or area with a less expensive cost of living.
Things to look out for include: lower property taxes; lower home values; low or no income tax; or no taxes on retirement income such as Social Security benefits or pensions.
2. Sell your home and rent
Continued homeownership can be a disadvantage from upkeep to rising property taxes. If this sounds like you, consider selling your home and becoming a renter. Granted, if you’re a young retiree, this may not be the best idea as you’ll have to be prepared for rent increases or even unexpected lease terminations.
But for those of you who’d rather have a landlord take care of home maintenance and tax and insurance obligations, renting may be ideal.
3. Downsize
Remaining in a large house with expensive utilities and mobility challenges such as stairs can be a serious disadvantage for some. Especially if you’re an empty-nester, having a large home with multiple stories and unused bedrooms may not make sense anymore.
The perks of selling your large current home and downsizing to a smaller one include the ability to buy a home with just one story so you can avoid the need to navigate stairs, or even the option of buying a home in a completely different location—perhaps closer to your family, or in a warmer climate.
4. Home sharing / housemates
What if you have a large home that you’re not fully utilizing—but you don’t want to move? If you’re attached to your current home or just want to keep it in the family, consider getting a housemate.
It’s not uncommon for homeowners to rent out a bedroom or even a wing of your home to someone. It could be a friend, a college student, or anyone else who needs a place to stay on a temporary or semi-permanent basis. There are services available that vet and then match both those looking for a place, and those looking to rent out their homes.
5. Get a home equity loan
Committing to a loan that comes due after you move from your home or pass away, sometimes leaving your heirs responsible for repayment can be a reverse mortgage disadvantage, but there are ways to access your home equity besides getting a reverse mortgage. You could get a home equity loan or line of credit, depending on your particular needs.
HELOCs typically have a draw period where you can withdraw funds, and then a repayment period. The length of these periods depends on the terms of your particular loan.
Upfront costs of taking out a HELOC generally aren’t too steep, making it a viable option for shorter-term needs such as making a home repair or paying off another loan.
Is a reverse mortgage right for me?
Like all financial products, there are pros and cons to reverse mortgages and each option above.
If you want to tap your home equity and you want to stay in your existing home, then a reverse mortgage may be a truly great option for you. To help determine if a reverse mortgage is right for you, run your scenario through our calculator to learn how much you qualify for and the fees associated with the loan.
Have more questions about using home equity for retirement? Speak with a prescreened reverse mortgage expert today. Or, you can call us toll free with your reverse mortgage questions: (866) 441 0246.
