Many homeowners have one big asset in their pocket: real property. They can use that asset to help them financially. Options for tapping home equity are HELOCs, home equity loans, refinances, and reverse mortgages.

HELOCs

With a home equity line of credit (HELOC), homeowners can borrow money against the equity in their home. Opening a line of credit can be a smart option to help cover unplanned expenses, and it’s used only as and when needed.

Home Equity Loans

A home equity loan is a lump sum junior loan on the property. It can be used for debt consolidation, to fund a vacation home, or for other purposes.

Refinancing

The AARP reports that 25.5 million people aged 50 and older still have a mortgage and will likely retire still paying on them. Depending on interest rates, it may make sense to refinance to a lower rate to lower the monthly payment. However, unless structured for a shorter term, it also extends the loan repayment term. Still, if someone has an adjustable-rate mortgage, refinancing to a fixed-rate mortgage when rates are low may make sense.

Reverse Mortgages

Reverse mortgages, only available to homeowners 62 years old or older, lets homeowners convert their equity into monetary funds and eliminate mortgage payments. The lender can pay the homeowner in different ways, such as a lump sum or monthly payments. Typically, the loan doesn’t have to be repaid until the last surviving owner moves out of the property or dies. Heirs can either pay back the loan and keep the property, or sell the property to repay the loan, pocketing any remaining equity.

We always recommend that our clients meet with their financial advisor before they make any decisions like these. If you have any questions or need any recommendations in order to explore these options, feel free to Contact Us anytime 🙂