Considerations Regarding Getting a Reverse Mortgage vs. Getting a Cash-Out Refinance
When you’re a senior citizen facing retirement, you may be worried about having enough money to cover your costs. One way to supplement your income is to get a reverse mortgage or a cash-out refinance on your home. But which one is right for you? Here are some considerations to keep in mind.
With a reverse mortgage, you borrow money using your home equity as collateral. The money you borrow does not have to be repaid until you die, move, or sell the home.
The main advantage of a reverse mortgage is that you don’t have to make any monthly payments. The interest on the loan is added to the balance of the loan, and the loan balance grows over time.
Another advantage of a reverse mortgage is that you can stay in your home as long as you want. As long as you continue to live in the home, you don’t have to worry about the loan being due.
There are also some potential disadvantages of a reverse mortgage. One is that you may end up owing more money than your home is worth if the value of your home declines. Another is that you may have to pay for insurance or set up an escrow account to protect the lender’s interest in your home.
With a cash-out refinance, you borrow against the equity you have in your home and receive a lump sum of cash. The loan is paid back over time, usually with fixed monthly payments.
The main advantage of a cash-out refinance is that you can receive a large sum of money all at once. This can be helpful if you need a lump sum to pay off debts or make a large purchase.
Another advantage of a cash-out refinance is that you may be able to get a lower interest rate than you would with a home equity loan or line of credit. This can save you money over time.
There are also some potential disadvantages of a cash-out refinance. One is that you may end up owing more money than your home is worth if the value of your home declines. Another is that you may have to pay closing costs when you refinance your home.