Alternatives to Taking Out a Reverse Mortgage on Your Home
The following is a guest blog post:
Reverse mortgages are becoming more popular because they provide senior citizens with cash that they can use to fund their retirements. These mortgages are based on the equity in the home and do not need to be paid back until the loan holder dies or moves out the house.
Even so, you may wonder what other options you have to use your home as an asset to secure your retirement. You may get the money you need to live comfortably by using any of these alternatives to a reverse mortgage.
Take Out a Home Equity Loan
The most common sense way to fund your retirement using your home as an asset would be to borrow against the house’s equity. A home equity loan gives you the cash in your home. You can use the money for any purpose you choose including saving it to live on during your retirement.
However, the loan must be paid back in full along with fees and interest. You should only take out a home equity loan if you can afford to make monthly payments on it until it is paid off in full. A certified management accountant can review your retirement budget and advise you if you can make payments on an equity loan comfortably.
Refinance Your Mortgage
If your current mortgage payments are becoming too expensive, you may lower them by refinancing your mortgage. Refinancing requires that you have good credit to secure a lower rate of interest and payment amount. Still, if you can refinance your home loan, you can keep your house as an asset to pass onto your heirs or to sell at a later date if you choose.
Sell Your House
You could get money to live on during your retirement by selling your house. If your home is paid off or if your mortgage balance is low enough to leave you plenty of money to live on after the house sells, you may consider selling your home and using the proceeds to fund your retirement.
This option may appeal to you if your home is becoming too expensive and difficult to maintain or if the taxes on it go up every year. A chartered financial analyst can help you utilize the sale’s proceeds to your advantage during your retirement.
Sell the House to Your Children
Finally, you can avoid taking out a reverse mortgage by selling your house to your children. You can then use the sale’s proceeds to pay rent to your children.
Your kids in return can benefit from the monthly rental income and tax deductions like depreciation, maintenance, and property taxes. This alternative to taking out a reverse mortgage also ensures that your home stays in the family.
A graduate of the University of Virginia’s McIntire School of Commerce, James Dondero has worked or contracted with some of the top names in the financial industry. He currently is the co-founder and the president of the Dallas-based Highland Capital Management, L.P. as well as the CEO of HCM Acquisitions Company. He volunteers extensively for Dallas-area charities and organizations like the Perot Museum of Natural Science, Education is Freedom, Snowball Express, and the George W. Bush Presidential Library.