If you’re considering alternatives to a reverse mortgage, there are several options you can explore depending on your financial situation and needs.
Here are a few alternatives to consider:
- Home Equity Line of Credit (HELOC): A HELOC allows you to borrow against the equity in your home, similar to a reverse mortgage. However, instead of receiving a lump sum or regular payments, you can access funds as needed. Interest rates may be lower than those of a reverse mortgage, but you’ll need to make regular payments on the borrowed amount.
- Home Equity Loan: With a home equity loan, you can borrow a lump sum based on the equity in your home and repay it over time with regular monthly payments. Interest rates are generally fixed, and you’ll have a predetermined repayment period. This option allows you to tap into your home equity without impacting your homeownership.
- Downsizing: Selling your current home and downsizing to a smaller or less expensive property can provide you with a lump sum of cash. By moving to a more affordable home, you can access the equity you’ve built up while potentially reducing your living expenses.
- Renting a Portion of Your Home: If you have extra space in your home, you could consider renting out a portion of it, such as a room or an accessory dwelling unit (ADU). Rental income can provide you with additional cash flow without requiring you to borrow against your home’s equity.
- Financial Assistance Programs: Depending on your location and circumstances, there may be financial assistance programs available to homeowners. These programs can provide grants, low-interest loans, or subsidies for specific needs like home repairs, energy efficiency upgrades, or property tax relief.
- Family Assistance: Exploring the possibility of financial assistance from family members may be an option worth considering. Having an open conversation about your financial needs and potential support from loved ones could help you find a mutually beneficial solution.
Remember, it’s essential to thoroughly research and assess the pros and cons of each alternative, considering your specific circumstances, financial goals, and preferences. It may also be wise to consult with a financial advisor or housing counselor who can provide personalized guidance based on your situation.
Searching for a reverse mortgage alternative? We have private and proprietary programs even for homes with significant value.
RMLD (Reverse Mortgage Lenders Direct) has been in the Reverse Mortgage industry for over five years helping seniors comparison shop the HECM reverse mortgage program online. We love our work and we are proud to help seniors who are looking for ways to release a portion of their home equity to retire more comfortably.
Over these years we have discovered other reverse mortgage alternatives and private reverse mortgages to add to our offering for all consumers not only seniors who wish to tap into their home equity. We believe that no single program is perfect for all, therefore we want to provide as many options as possible for anyone looking for the best terms that can provide much needed cash from the equity of their homes. We have learned that different banks/lenders/investors will offer different interest rates, closing fees, and amount you can receive so comparison shopping a reverse mortgage program is still a very important part of the process in order to make sure you choose the right program with the best terms. What we mean by securing the best terms is the lowest interest rate margin and lowest closing costs. Regardless of which reverse mortgage program you chose Reverse Mortgage Lenders Direct will help you get the best deal. So if you are interested in the best terms for a reverse mortgage, simply fill out the quote form for us to start the process on your behalf (it’s free).
Most likely your home is your largest asset and with low interest rates and rising home values many smart consumers are looking for ways to tap into some of this equity without adding to their debt levels. Most consumers are not familiar with some of the programs we are about to introduce. If you need more information about specific qualifications requirements for any of these options please get in contact with us.
Programs/mortgages/options we will cover in this article:
Cash out refinance
Home equity loan
HECM reverse mortgage
Private reverse mortgage
Private jumbo reverse mortgage
Equity share agreement
Family reverse mortgage
Selling the home/renting
Forward mortgage alternatives that you are probably familiar with include doing a cash out refinance, HELOC (home equity line of credit), or a home equity loan. With these mortgage programs you will have a recurring monthly payment to make once you tap into the equity. These are the traditional mortgage products that most banks offer. Interest rates, terms, and closing fees vary so always comparison shop the deal around to as many lenders/brokers as you feel comfortable having your information before committing to a loan. But Remember, whenever you compare a mortgage proposal for any type of mortgage, It is critical to compare the exact same program, the exact same loan amount and the exact same interest rate. This makes it much easier to determine which of the lenders are providing the most reasonable fee’s.
The issue with the above programs is that they all require an ongoing monthly payment on the loan. This can be an issue for anyone who is near retirement and or trying to reduce the monthly living expenses or generate new income from the equity. You may already have a HELOC/home equity loan and are looking for even more cash from your equity but wish to avoid adding more to your monthly obligations the programs below may be more suited for you.
The HECM reverse mortgage is a safe way for senior over the age of 62 to tap into the homes equity without adding new mortgage payments. This is not a grant or free money to the seniors but instead an interest only loan with an option to not make the interest payments. If the reverse mortgage borrower decides to never make an interest payment, the loan balance accrues over time with the main benefit being that no monthly payments are required (they are optional if you wish to keep the accruing mtg down). As with all of the programs listed on this page the senior needs to maintain the property maintenance/taxes/homeowners insurance up to date to be in good standing. This is extremely important point that you need to include when doing your math whether or not this is an option for you. Many seniors forget to include this into their calculation but if you can’t pay the above you will loose your home.
Downsides of the reverse mortgage include the age restriction of 62, high upfront FHA fees/closing costs, and limited access to homes equity. Your heirs will be responsible to pay off any amount you borrowed if they wish to keep the home, this may not be an issue if future home appreciation increases to a level higher than the interest that accrues on the HECM reverse. Any proceeds from the sale of the home after paying of the reverse mtg would go to your heirs if they don’t want the property.
Private reverse mortgages have been hard to come bye after the great recession hit and just now lenders are introducing private jumbo reverse mortgage options for homeowners with home values above $650K. These private reverse mortgages come with high interest rates and higher closing fees compared to traditional cash out refinance programs. These programs are hard to compare and hard to find who is currently offering them.
Almost all of the reverse mortgages on the market are the HECM reverse mortgages (95%+). Private reverse mortgages and jumbo reverse mortgages are just making a come back now and we are working as hard and fast as we can to get more information on these programs for seniors. We will update this page with the jumbo reverse mortgage programs that we have found but fees are high so we already have a better alternative even for jumbo home owners.
If you are over the age of 18, own your home (even with a mortgage balance), and have good credit you may qualify to release some of your equity, without having any new mortgage/loan payments through a new program called equity share agreement.
This new equity release option from RMLD is not a loan/mortgage but instead a way for you to tap into your equity today without any payments through selling the right for your homes future appreciation.
We have partnered with private investors who are willing to purchase the rights to your future appreciation in return for a lump sum payment today to you. You own the home, there are no new mortgage payments to be made, and there are many other benefits without any of the downsides with a traditional forward/reverse mortgage loan option.
There are no restrictions on how you use the proceeds. Common uses include:
Paying down debts
Downsides of the equity share program include state restrictions to only Florida and California. You will be sharing on the upside future appreciation of the homes value which could be a large chunk of money (granted this is not real today – this is in the future IF your home goes up in value). This is a great way to take some risk of the table if you own real estate and the possibilities are endless for how you can leverage this program to better improve your finances.
Advantages of the equity share agreement:
LTV (loan to value) can be higher on this program versus a reverse mortgage so if you have been disqualified for a reverse mortgage this program may be a better option for you or another alternative to consider. Most financial advisers and mortgage brokers have no idea that this program exists. There are no fees to be paid, there are no closing costs. You will be responsible for the appraisal fee but that is also true with every one of these programs/options.
Intra family reverse mortgage:
This is a new type of reverse mortgage whereby you would sell a portion of your equity to one of your family members. This loan type can be informal with children providing a monthly check to support their parents in return for the inheritance of the home in the future.
Not everyone has a well off family member and when family/business mix there could be more room for issues within these members. This is a relatively new trend and there are some companies in this market that will facilitate the paperwork making the deals easier if you want more structure to the deal. Home values don’t always increase in value so this could prove to be a bad investment and you should approach this deal
Selling the home and renting: This option is not a good alternative if you love your home and want to retire there. Renting your home out can generate income for you but where will you live? You could downsize for a while and allow the extra income to build up. For many seniors this is not the best alternative and selling costs are high when you get realtors involved (6% commissions plus getting house ready for a sale). Home prices are are almost back to pre-recession levels and you could potentially make a lot more (or have more equity) if you hold on and don’t sell for a numbers of years.