Reverse Mortgage vs Selling Property Outright vs Equity Sharing Agreement
If you're over the age of 62 and own your home outright, you have several options for tapping into the equity you've built up. These include taking out a reverse mortgage, selling your property outright, or entering into an equity sharing agreement. Each option has its own pros and cons, so it's important to understand all the considerations before making a decision.
With a reverse mortgage, you can remain in your home and receive a lump sum of cash, a line of credit, or monthly payments. The payments are usually tax-free, and you don't have to make any repayments until you die, move, or sell the property. One of the biggest advantages of a reverse mortgage is that it doesn't impact your current cash flow or monthly budget.
However, there are some drawbacks to consider. First, a reverse mortgage will typically reduce the equity you have in your home. Additionally, the fees associated with a reverse mortgage can be high, and they can eat into your loan proceeds. Finally, if you're not careful, a reverse mortgage can put your home at risk if you don't stay on top of your property taxes and insurance.
selling your property outright
Selling your property outright is another option for tapping into your equity. This can be a good option if you need a large sum of cash or if you're looking to downsize anyway. When you sell your property outright, you'll receive a lump sum of cash that you can use for whatever you want.
However, there are some drawbacks to consider as well. First, selling your property outright will typically result in a lower sales price than if you were to sell it on the open market. Additionally, you'll have to find another place to live, which can be difficult and expensive. Finally, selling your property outright means giving up all the equity you've built up in your home.
equity sharing agreement
An equity sharing agreement is a third option for tapping into your home equity. With an equity sharing agreement, you enter into a contract with another party, typically an investor or family member, in which they agree to share in the equity of your home. This can be a good option if you need cash but don't want to sell your property outright.
However, there are some drawbacks to consider as well. First, it can be difficult to find someone who's willing to enter into an equity sharing agreement. Additionally, you'll have to give up a portion of the equity in your home, which means you'll have less to leave to your heirs. Finally, an equity sharing agreement can be complex and may require the help of a lawyer to draw up the contract.