Reverse Mortgage, Cash-Out Refinance or Home Equity Loan: What’s the Right Fit for You?
When it comes to accessing the equity in your home, you’ve got three main options: a reverse mortgage, a cash-out refinance or a home equity loan. But which one is right for you?
It depends on your goals and circumstances. Let’s take a closer look at each option to help you decide which one is right for you.
A reverse mortgage is a loan that allows homeowners 62 and older to tap into their home equity without having to make monthly mortgage payments.
The loan is repaid when the borrower dies, sells the home or moves out of the home. The loan balance can never exceed the value of the home.
If you want to stay in your home and don’t want to make monthly mortgage payments, a reverse mortgage could be a good fit for you.
A cash-out refinance is a new mortgage that replaces your existing mortgage, but for more than what you owe on your home. The difference between your new loan amount and your existing loan balance is paid out to you in cash.
You can then use that cash however you want. Some people use it to make home improvements, pay down high-interest debt or invest in other property.
A cash-out refinance could be a good fit if you want to access the equity in your home and put it towards another financial goal. Keep in mind that you’ll have to make monthly mortgage payments with a cash-out refinance.
Home Equity Loan
A home equity loan is a loan that uses your home as collateral. Home equity loans typically have fixed interest rates and fixed monthly payments. The loan term is usually 5-15 years.
Home equity loans can be a good fit if you need to borrow a lump sum of money for a one-time expense, such as a home improvement project, and you want the security of fixed monthly payments.
Which Option Is Right for You?
The best way to figure out which option is right for you is to speak with a financial advisor who can help you understand your options and figure out what’s best for your unique situation.