Reverse Mortgage vs. Cash-Out Refinance vs. Equity Sharing Agreement: What to Consider
When it comes to senior financial planning, there are a number of options to consider. Two popular options are reverse mortgages and cash-out refinances, but there is also the option of an equity sharing agreement. Each of these has different pros and cons that should be considered before making a decision.
A reverse mortgage is a loan that allows homeowners 62 and older to access a portion of their home equity without having to make monthly mortgage payments. The loan does not have to be repaid until the borrower dies, sells the home, or moves out of the home for 12 months or more.
A cash-out refinance is a new mortgage that pays off the existing mortgage and provides cash to the borrower in the form of a lump sum. The borrower then makes monthly payments on the new mortgage.
An equity sharing agreement is an arrangement between two parties where one party agrees to invest money in the property of the other party in exchange for a percentage of the ownership or future profits from the property.
Each of these options has different pros and cons that should be considered before making a decision. Some things to keep in mind include:
-How long do you plan to stay in your home?
-What is your current financial situation?
-What are your long-term financial goals?
-How much equity do you have in your home?
-What are the tax implications of each option?
Reverse mortgages can be a good option for those who want to stay in their home and do not need the extra cash each month. However, it is important to keep in mind that the loan will need to be repaid eventually and this could put a strain on your finances later in life.
Cash-out refinances can be a good option for those who need extra cash now and are comfortable making monthly mortgage payments. However, it is important to keep in mind that you will be starting over with a new 30-year mortgage and this could end up costing you more in the long run.
Equity sharing agreements can be a good option for those who want to invest in a property without taking on all of the risks associated with ownership. However, it is important to keep in mind that you will be giving up some control over the property and you may not see any profits if the property does not appreciate in value.