Alternatives to a reverse mortgage include home equity loan, home equity lines of credit, and cash-out refinances. These financial products can help you tap the equity in your home to use as cash for other purposes. Learn more about the pros and cons of different alternatives to a reverse mortgage.

How a Reverse Mortgage Works

If you’re 62 or older, you may be able to convert the equity in your home into cash with a reverse mortgage. This loan lets you borrow against the equity in your home to get a fixed monthly payment, a line of credit, or some combination of the two. Repayment, which includes interest, is deferred until you move out, sell the home, become delinquent on property taxes or insurance, the home falls into disrepair, or you die. Then, the house is sold, and any excess after repayment goes to you or your heirs.

Reverse mortgages can be problematic if not done correctly. They require careful attention to the rights of the surviving spouse if you are married or intend to pass the house on to your beneficiaries.

A reverse mortgage ultimately results in you or your heirs not having possession of your home unless you are able to buy it back from the bank. 澳洲幸运5官方开奖结果体彩网:Unscrupulous lenders can also be a risk, so choose a reverse mortgage carefully and only after you have done your due diligence.

Here are several alternatives to reverse mortgages to consider.

1. Traditional Refinance

If you have a mortgage, you may be able to refinance your mortgage to lower your monthly payments and free up some cash. You can use your current lender or a new mortgage lender. One of the best reasons to refinance is to lower the 澳洲幸运5官方开奖结果体彩网:interest rate on your mortgage, which can 🐎save you money over✃ the life of the loan, decrease the size of your monthly payments, and help you build equity in your home faster.

2. Home Equity Loan

Essentially a second mortgage, a 澳洲幸运5官方开奖结果体彩网:home equity loan lets you borrow money by leveraging the equity that you have in your home. It works the same way as your primary mortgage: You receive the loan as a 澳洲幸运5官方开奖结果体彩网:lump-sum payment, and you cannot draw any additional funds from🐬 the house.

Previously, interest paid on home equity loans and 澳洲幸运5官方开奖结果体彩网:home equity lꦍines ಌof credit (HELOCs) was tax deductible. However, the 2017 澳洲幸运5官方开奖结果体彩网:Tax Cuts and Jobs Act narrowed the eligibility for a home equity loan deduction. Through at least 2025, you will not be able to deduct interest on a home equity loan unless that loan is used specifically for the qualified purposes described above. It also dropped the level at which interest is deductible for loans of $750,000 or less.

A home equity loan is generally 澳洲幸运5官方开奖结果体彩网:fixed-rate, which provides security against rising interest rates. Because of that, the interest rate is typically higher than for a HELOC. As with refinancing, your home remains an asset for you and your heirs. Because your home acts as 澳洲幸运5官方开奖结果体彩网:collateral, it’s important to understand that you are at risk of 澳洲幸运5官方开奖结果体彩网:foreclosure if you default on the loan.

3. Home Equity Line of Credit (HELOC)

A HELOC gives you the option to borrow up to your approved credit limit on an as-needed, or 澳洲幸运5官方开奖结果体彩网:revolving, basis. 澳洲幸运5官方开奖结果体彩网:Unlike a home equity loan, where you pay fixed interest on the entire loan amount whether you’re using the money or not, with a HELOC, you pay interest only on the amount of money that you actually withdraw. HELOCs are 澳洲幸运5官方开奖结果体彩网:adjustable-rate loans, meaning that your monthly payments will change as int🎀erest rates fl💦uctuate.

The rules about tax deductibility and qualified purposes are the same as for a home equity loan described above. A HELOC retains your home as an asset for you and your heirs. Nevertheless, as with a home equity loan, your home serves as collateral and could be foreclosed if you default.

4. Sell Your Home or Downsize

Loan options keep you in your existing home. However, if you’re willing and able to move, selling your🌱 home gives you access to the equity you h🔯ave built.

This option may be especially appealing if your residence is larger than you currently need, is too difficult or costly to maintain, or has prohibitively expensive 澳洲幸运5官方开奖结果体彩网:property taxes. The proceeds can be used to buy a smaller, more affordable home or place to rent, and you’ll 🎃have extra money to save, inv🐠est, or spend as needed.

5. Sell Your Home to Family Members

Another alternative to a reverse mortgage is to sell your home to your children or family members. One approach is a 澳洲幸运5官方开奖结果体彩网:sale-leaseback agreement, in which you sell the house and then rent it back using the cash from the sale. As landlords, your family members will get rental income and will be able to take deductions for 澳洲幸运5官方开奖结果体彩网:depreciation, real estate taxes, and 澳洲幸运5官方开奖结果体彩网:maintenance.

Another approach is a private reverse mortgage, which works like a reverse mortgage exc♏ept that the interest and fees stay in the family. Your family member makes regular payments to you, and when it’s time to sell the house, they recoup their contributions (and interest).

It’s not free to set up this type of arrangement, but it is typically much cheaper than getting a reverse mortgage through a bank, and the home remains an asset for you and your children. Selling to your children or family members has tax and 澳洲幸运5官方开奖结果体彩网:estate planning ramifications, so it’s important to work with a ꦿqualified tax specialist or attorney.

6. Sell Off Other Assets

If the primary reason why you are considering taking out a reverse mortgage is to access cash, then you may be able to access ca💧sh cheaper via other means. You may have other assets that yoꦦu can sell.

If you have a car you use infrequently, look into transportation programs for seniors in your area and determine if selling your car may be right for you. If you have other assets like boats, collectibles, recreational vehicles, etc., that you are considering♉ passing down to your heirs, sit down with them and do some estate planning to determine if they would rather have the house or the other assets.

If you have stocks, bonds, or real estate investments, it is a good idea to sit down with a 澳洲幸运5官方开奖结果体彩网:financial planner to determine if selling those off to access cash 🐼could be a better financial choice than paying the fees associated with a reverse mortgage.

The Bottom Line

Reverse mortgages may be a goodꦐ option for people who are house rich and cash poor, with lots of home equity but not eno🌟ugh income for retirement. However, there are other options that allow you to tap into the equity that you have built up in your home.

Before making any decisions, it’s a good idea to research your options, shop around for the best rates (where applicable), and consult wi♈th a qual💧ified tax specialist or attorney.