Reverse mortgages for senior homeowners has been more heavily advertised over the past months and we have seen many offers for these types of home loans for senior homeowners, but reports have also indicated that home equity loans are making a return, which could offer a different path for a homeowner who may need money from their home’s equity for expenses that arise later in life. Obviously, a home equity loan, for example, is not restrained to senior homeowners, but with mixed opinions on reverse mortgage home loans, seniors may have another option when it comes to finding the funds they need for costs like medical care, home repair, or other personal uses.
A recent article on SmartMoney.com stated that, “After more than three years, some lenders are cautiously re-entering the second mortgage market. The effect hasn’t registered in the national statistics yet, but regional banks are reporting significant increases.” Understandably, a home equity line of credit has, in times past, been an option that many homeowners have used to help meet their children’s college tuition, pay for medical bills, or as a way to consolidate debts in some cases, as those who either seek a reverse mortgage loan or a home equity line of credit can use these funds for a wide range of purposes.
However, some may ask why would a homeowner who could qualify for a reverse mortgage opt for a home equity loan, as a reverse mortgage does not require monthly payments as long as the homeowner remains in their home and keep their property taxes current? It goes without saying that for any homeowners who could get money from their home’s equity and not have to make payments, this would typically be the preferable option as a home equity line of credit does necessitate repayments on a monthly basis.
Obviously, a home equity loan is the only opportunity that younger homeowners may have in these situations, but there are still some who feel that senior homeowners should weigh their options and make sure they have their finances and future goals in mind before they make a decision. While a reverse mortgage does not require repayments it is debt and homeowners who fail to adhere to the guidelines of their reverse mortgage can lose their home as a result, but this is not so different from a home equity loan.
Yet, homeowners who use a reverse mortgage will not be making payments to reduce the principle they owe and, this type of loan in particular, will continue to build in cost. Many homeowners have been able to keep their home as their principal residence for the rest of their life and after they have passed away the sale of their home has repaid the reverse mortgage obligation, but homeowners need to understand that if they choose a reverse mortgage the loss of their home after they pass away or funds from their retirement will be most likely be used to erase this debt.
Understandably, some seniors are simply in a bad financial position though, and this would obviously make acquiring a home equity loan mortgage unaffordable. Reports that home equity loans are increasing also mention that homeowners who choose a home equity line of credit must be in some of the best financial positions before they may have the opportunity to borrow, so even if a reverse mortgage is a homeowner’s only option, careful consideration should go into this decision before a homeowner makes a move.