When you’re a homeowner, you have a lot of options when it comes to borrowing money against your property. Two popular options are home equity loans and reverse mortgages, but there are also second mortgages to consider. So, which is the best choice for you?
It depends on your unique circumstances. All three types of loans have their own advantages and disadvantages. Here are some things to consider when deciding which type of loan is right for you:
Home Equity Loan:
-With a home equity loan, you borrow a lump sum of money and make fixed monthly payments.
-Interest rates on home equity loans are usually lower than credit cards or personal loans.
-You can use the money from a home equity loan for anything you want, including home improvements, debt consolidation, or investing.
-Home equity loans are typically available in 5-15 year terms.
-A reverse mortgage is a loan against your home that you don’t have to pay back until you sell the house or die.
-Reverse mortgages can be a good option for seniors who want to stay in their homes and need extra money for living expenses.
-Unlike a home equity loan, a reverse mortgage doesn’t require monthly payments.
-However, the interest on a reverse mortgage accumulates over time and is eventually added to the loan balance. This can reduce the equity you have in your home.
-A second mortgage is a loan that’s secured by your home, just like your first mortgage.
-However, a second mortgage comes with a higher interest rate because it’s a higher-risk loan for the lender.
-Second mortgages are typically available in 5-15 year terms.
-You can use the money from a second mortgage for anything you want, including home improvements, debt consolidation, or investing.
So, which type of loan is right for you? It depends on your unique circumstances. Consider all of your options and speak to a financial advisor to make the best decision for your situation.