Evaluating Reverse Mortgages vs. Second Mortgages vs. HELOCs
Reverse Mortgage vs. Second Mortgage vs. Home Equity Line of Credit: What to Consider
When it comes to senior financial planning, there are a lot of products and options to consider. One big decision is whether to get a reverse mortgage, second mortgage, or home equity line of credit (HELOC). Here are some things to think about as you make your decision.
Age Requirements: With a reverse mortgage, you must be 62 or older to qualify. For a second mortgage or HELOC, there is no age requirement.
Loan Amount: With a reverse mortgage, you can borrow up to 60% of the appraised value of your home. With a second mortgage, you can usually borrow up to 80% of the appraised value of your home. And with a HELOC, you can borrow up to 85% of the appraised value of your home.
Loan Term: A reverse mortgage has no loan term. You can stay in your home for as long as you want and never have to make a payment. With a second mortgage, the loan term is usually 15 years. And with a HELOC, the loan term is usually 10 years.
Interest Rate: The interest rate on a reverse mortgage is usually higher than the interest rate on a second mortgage or HELOC.
Payment Options: With a reverse mortgage, you can choose to receive payments in lump sum, monthly payments, or a line of credit. With a second mortgage, you usually have to make monthly payments. And with a HELOC, you can choose to make monthly payments or just make payments on the interest, similar to a credit card.
Taxes and Insurance: With a reverse mortgage, you are still responsible for paying property taxes and homeowners insurance. With a second mortgage or HELOC, these payments are usually included in your monthly payment.
Default: If you default on a reverse mortgage, you can lose your home. With a second mortgage or HELOC, you will only lose your home if you stop making payments and go into foreclosure.
As you can see, there are a lot of things to consider when deciding whether to get a reverse mortgage, second mortgage, or HELOC. Talk to a financial advisor to see which option is best for you.
© 2024, Exuity