You are currently viewing When you, as a homeowner, find yourself in need of funds what are your options?

When you, as a homeowner, find yourself in need of funds what are your options?

Reverse Mortgage


In order to qualify for a Reverse Mortgage you have to be 62 years of age or older and the property must be your primary residence. The most common is a Home Equity Conversion Mortgage (HECM) and it allows homeowners to use their property as security for a loan but differs from a traditional mortgage in that making monthly mortgage payments is eliminated. Instead, you can receive a lump sum, a line of credit or receive a monthly tax-free amount. The amount that you “borrow”,  comprised of principal and accruing interest, are added to the mortgage balance. You still must qualify by showing you can pay your property taxes, home insurance, and all your bills but there is no minimum credit score required. The costs associated with a reverse mortgage can be high and there are guidelines regarding repayment. Repayment is deferred until you sell the home, move out or pass away. If you become delinquent on real estate tax or home insurance payments then the Lender may take legal action to sell the house.


Cash-Out Refinance


A cash-out refinance occurs when you replace your existing mortgage with a new mortgage of a higher balance. The difference between your old and new mortgage after deducting any refinance costs is referred to as your cash proceeds. You may be able to lower your interest rate, change the loan term or the kind of loan you originally had. These loans are available to owners of Primary, second home and investment property and loan to values, interest rates and qualifications may differ in each case. Typically credit score is a factor.


Second mortgages


A second mortgage is exactly that- a second mortgage that is behind the first mortgage existing on your property. The second mortgage is said to be subordinate,  or lower in rank, to the first. Generally, these are fixed-rate loans and you cannot increase the amount once it is funded. It works the same way as the first mortgage where you repay the loan with a monthly payment consisting of principal and interest


Home Equity Line of Credit (HELOC)


A Home Equity Line of Credit is a mortgage with an approved credit limit that allows you to draw funds on an as-needed basis. In this case, you only pay interest on the amount you are using, not the whole approved amount. You can choose to pay it down to zero and then draw funds again when you need it. It is an adjustable-rate loan so the monthly payments can change based upon the rate fluctuation and the index it is tied to.


Sell Your House


Selling your house relieves you of ownership and any mortgage debt tied to the property.  It can give you access to any equity you have accumulated over the years after the mortgage has been repaid. You may want to rent and put your proceeds in the bank or some other investment or perhaps choose to buy a smaller place to reduce your overall expenses.


Sell and Leaseback


Selling your house with a Leaseback is a new trend, You are able to receive the equity after the mortgage and closing costs are deducted, relieve yourself of real estate tax and insurance payments, free yourself from maintenance and repair headaches and remain in your home. You can negotiate a set rental payment and lease term in advance as part of your contract for sale and the landlord takes care of the property

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