Real Estate

Taking Out a Reverse Mortgage versus Downsizing

A reverse mortgage is essentially an extra source of income for seniors using their house as collateral. It’s been a popular choice for those in need of the funds to continue living in their home and to cover associated expenses. It also allows the senior to continue living in the house that they’ve become emotionally attached to for years on end.

On the other hand, instead of taking out a reverse mortgage, one can look to downsize to reduce the amount of expenses that are being bled out on a larger house. Exploring these other ways can help mitigate costs and preserving their home at the same time.

Choosing to Take Out a Reverse Mortgage

Senior homeowners must be at least 62-years-old to be eligible for a reverse mortgage. They also must have a sufficient amount of equity built up in their home, which will ultimately be reviewed up applying.

There are three types of reverse mortgage that homeowners can choose from, depending on their situation: single-purpose, proprietary, and Home Equity Conversion Mortgage (HECMs). Additionally, homeowners will be able to receive their money in multiple ways as well – lump sum, monthly tenure payments, and credit lines. The fees are dependent upon the value and are comparable to a traditional FHA mortgage.

Choosing to Downsize

Without having to go through the entire process of taking out the reverse mortgage, along with preserving the home’s equity, a homeowner can choose to downsize. This may be a difficult option for a homeowner that’s lived in a home for long periods of time, but if times are financially burdening, it may be a solid choice to preserve capital.

Bio: Kuba Jewgieniew is the head of Realty ONE Group, a real estate firm that will simplify the entire process of buying or selling your home.