Get a Reverse Mortgage or a Home Equity Line of Credit?
Home equity is a valuable asset that qualified borrowers may be able to access.
Is a reverse mortgage or a home equity line of credit a better choice?
The best mortgage loan program will largely depend on your current financial situation and your long-term goals.
What Should You Know About Reverse Mortgages?
Different from traditional home loans, a reverse mortgage has unique characteristics and terms.
As the only type of home loan with an age requirement, borrowers must be at least 62 years old to qualify for a reverse mortgage.
Low credit scores will not eliminate your opportunity to qualify for a reverse mortgage, as there are no minimum credit score requirements.
A significant amount of home equity is needed to get approved for a reverse mortgage loan.
Disbursements for the loan proceeds may be received upfront, monthly or via a line of credit.
Monthly payments are never required for a reverse mortgage.
The most popular type of reverse mortgage is a Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration.
Reverse mortgages are ideal for eligible seniors who are not planning to move soon. If you decide to move or to sell your home, the reverse mortgage loan would require full repayment.
Why Get a Home Equity Line of Credit?
A home equity line of credit (HELOC) enables you to borrow funds against the appraised value of your home.
A HELOC is very similar to revolving accounts, such as a credit card or a personal line of credit.
Unlike a credit card or a personal line of credit, a HELOC is a collateral-based loan that is secured against your home.
Typically, to qualify for a HELOC, you’ll need to meet credit requirements, debt ratio requirements and have equity within your home.
There are no age requirements for a home equity line of credit.
A HELOC does not require you to sell your home if you move.
HELOCs may be secured against a second home or an investment property.
Who Can You Speak With About a Reverse Mortgage or a HELOC?
Whether you get a reverse mortgage or a home equity line of credit, the funds may be used for nearly any purpose.
If you qualify for both loan programs, your decision may be based on a loan with payments or without payments, and consideration toward home equity you plan to leave for your heirs.
With a reverse mortgage, you won’t have mortgage payments, however, you could be at risk of losing your home if you do not pay your property taxes, homeowners insurance, HOA fees or fail to maintain the property.
Speak with Samantha Cooley, a reverse mortgage expert with Mindful Money.
Based in Phoenix, AZ, Mindful Money is a licensed mortgage brokerage that offers home loans in Arizona, California and Colorado.
Apply Online for a home loan while you’re here.
We’ll promptly follow up to discuss your inquiry and the loan application process.