A major worry that today’s seniors are facing is that they do not have the funds to sustain a comfortable retirement. Since the cost of living has increased and today’s seniors are living longer than ever before, retiring at 65 isn’t as achievable as it may have been. If you’re concerned about your retirement, know that you may have options to make your retirement more comfortable and secure. One option that many people forget is taking advantage of home equity. Seniors who have already retired or are planning on retiring soon can take a portion of money that they have accrued in the value of their home and convert it into cash. Today, we are going to cover the four most common products that involve home equity.
Our top four choices that may help you use your home equity as an asset are the Home Equity Conversion Mortgage, the Home Equity Loan Optimizer, the Home Equity Loan, and the Home Equity Line of Credit. Now if none of these products sounds familiar, don’t worry. We are going to give you a rundown of each product so that you have a better idea of what option best fits you.
Home Equity Conversion Mortgage
One trending option available to retirees is the Home Equity Conversion Mortgage, also known as a reverse mortgage. HECM is a loan that allows eligible homeowners 62 years or older to access a portion of the equity in their home and convert it to cash. With the HECM there are three different programs available to help better suit your needs. Every situation is different, so it may be helpful for you to speak with one of our licensed specialists. They will be able to tell you if you may qualify for this loan as well as answer any other questions you may have.
Home Equity Loan Optimizer
Now if for some reason you are unable to qualify for a HECM, there may be another option for you. We have recently released a new type of reverse mortgage known as HELO. Short for Home Equity Loan Optimizer, this inclusive mortgage product is geared towards those who do not qualify for a traditional HECM. Unlike a traditional HECM loan, HELO has fewer government restrictions and allows a maximum loan limit of four million dollars. Some of the regulations of the HECM still apply, so it’s important that you talk to one of our licensed specialists if you are interested in the HELO. They can answer your questions and tell you more about the program.
Home Equity Loan
Another option you may want to consider is a home equity loan. Like the HECM and HELO, this loan allows you to convert part of your home equity into cash as long as you meet the requirements. It works the same way as your primary mortgage works, which is why it is sometimes called a “second mortgage”. With the loan you receive a single lump-sum disbursement and make regular payments to pay off the principle and interest. These will more than likely be at a fixed rate. While some like this plan, many seniors prefer the reverse mortgage loan because you are not required to make monthly payments on your loan*.
Home Equity Line of Credit
A Home Equity Line of Credit, also known as HELOC, is a method of revolving credit that uses your home as collateral. A lender will usually set a credit limit on the HELOC to be a percentage that is based on what the home is appraised at minus the balance of the existing mortgage. In other words, a HELOC utilizes your home equity to provide you with a line of credit. This may be a good option for someone who, along with meeting the requirements, has a steady income so they can make the payments. If you are someone who does not have a steady income or has a fixed income, you may want to explore a Reverse Mortgage Line of Credit as an alternative
Now that you know there are other options available for you, we hope your mind will be more at ease. Planning for retirement involves making big decisions, so we hope you will feel more confident about making these decisions after reading this article.
*Homeowners must still maintain the property, pay homeowners insurance, and property taxes to avoid foreclosure.