Reverse Mortgage vs. Equity Sharing Agreement: What to Consider
When it comes to accessing the equity in your home, there are a couple different options available to you. Two of the more popular methods are reverse mortgages and equity sharing agreements. But which one is the right fit for you?
Here are a few things to consider when making your decision:
One of the main eligibility requirements for a reverse mortgage is that you must be at least 62 years old. So, if you're not quite at retirement age yet, a reverse mortgage may not be an option.
With an equity sharing agreement, there's no age requirement. You can enter into one of these agreements at any age, as long as you have a willing partner.
Your Financial Situation
A reverse mortgage can provide you with a lump sum of cash or a line of credit that you can draw on as needed. With an equity sharing agreement, you'll typically receive a lump sum of cash up front.
So, if you're in need of immediate cash, an equity sharing agreement may be the better option. But if you're not sure how much money you'll need or when you'll need it, a reverse mortgage may give you more flexibility.
Your Home's Value
The amount of money you can borrow with a reverse mortgage or receive from an equity sharing agreement will depend on the value of your home. So, if your home is worth more, you may be able to access more money.
Of course, the value of your home can also fluctuate over time. So, if you're considering a reverse mortgage, make sure to keep an eye on your home's value to make sure it doesn't drop below the amount you owe on your mortgage.
If you have children or other heirs that you want to leave your home to, a reverse mortgage could jeopardize their inheritance. That's because the loan will need to be repaid when the house is sold, and there may not be anything left over for your heirs.
With an equity sharing agreement, your heirs will still be able to inherit your home, since they'll only be entitled to the portion of the equity that you haven't sold off.
Your plans for the future
If you're not sure how long you'll stay in your home, a reverse mortgage may not be the best option. That's because the loan will need to be repaid when the house is sold, and if you sell before the loan is paid off, you may end up owing money to the lender.
An equity sharing agreement, on the other hand, doesn't have to be repaid until you sell the property or die. So, if you're not sure how long you'll stay in your home, this may be a better option.