Reverse Mortgage vs HELOC: Which Is Right for You?
When it comes to securing financial assistance in retirement, homeowners have several options available to them. Two of the most popular are reverse mortgages and home equity lines of credit (HELOCs).
But which one is right for you? It depends on your unique circumstances and financial goals.
In this article, we'll take a closer look at reverse mortgages and HELOCs, so you can make an informed decision about which one is right for you.
What is a Reverse Mortgage?
A reverse mortgage is a loan that allows homeowners 62 years or older to convert a portion of their home equity into cash. The loan doesn't have to be repaid until the borrower dies, sells the home, or moves out of the house for 12 months or more.
What is a HELOC?
A HELOC is a line of credit that uses your home equity as collateral. HELOCs typically have lower interest rates than credit cards or personal loans. And, like a reverse mortgage, you don't have to repay the loan until you sell the house or die.
However, with a HELOC, you're only able to borrow what you need, when you need it. With a reverse mortgage, you're given a lump sum of cash upfront.
Reverse Mortgage vs HELOC: Which is Right for You?
Now that we've covered the basics of each loan, let's take a closer look at when each one might be the right choice.
Reverse Mortgage: If you want a lump sum of cash that you don't have to repay until you sell your home or die, a reverse mortgage may be the right choice for you. This type of loan can be used for anything - from home improvements to paying off debt - and there are no monthly payments required.
HELOC: If you need access to cash but want the flexibility to only borrow what you need, when you need it, a HELOC may be the better option. This type of loan can also be used for anything - from home repairs to covering unexpected expenses - but you'll only be required to make interest payments on the amount you borrow.