A reverse mortgage is a loan popularly used by senior citizens to reduce their monthly expenses. As their financial circumstances change after retirement, many older people convert a part of their home equity into cash. So, instead of the borrower paying money to the lender, the lender makes payments to the borrower monthly.
Although reverse mortgages are a good option in some cases, they come with several disadvantages. Before agreeing to a reverse mortgage, you must look into all the details thoroughly and discuss your options with a qualified financial advisor.
This article will discuss some alternatives to reverse mortgages that make excellent options for senior citizens.
5 Alternatives to Reverse Mortgages
Here are some of the alternatives to a reverse mortgage that you should consider.
1. Refinance
A refinance loan is one of the best alternatives to a reverse mortgage. With the right lender and terms, you can use a refinance loan to get lower interest rates. Your monthly payment will drop to a considerably lower rate by applying for a refinance loan, especially if you have a variable rate loan. The fees for a refinance loan aren’t just lower than your current mortgage. Still, they are also typically lower than that of a reverse mortgage.
2. Sell And Downsize
While this might not be something you want to consider, downsizing is often a better option than a reverse mortgage. Selling your home is a tough decision to make. But, selling your house can give you financial freedom as well. The selling and downsizing option is better than a reverse mortgage because it can put a substantial amount of money in your pocket instead of increasing your debt. The funds obtained can be used to buy a smaller house at a more affordable rate.
3. Home Equity Loan
A home equity loan is another option that makes a great alternative to a reverse mortgage. A home equity loan provides you a lump sum of money while allowing you to stay in your home. The fees and interest rates for a home equity loan are typically lower than a reverse mortgage. You can get the loan at a fixed interest rate.
4. Selling Your House To Family or Friends
If you want to keep your house in the family, selling to family and friends is an easy way to improve your financial circumstances and avoid a reverse mortgage. By selling your home to your family, you can still stay in your house. In most cases, your family or friends can get a mortgage at lower rates, and you can pay them the monthly fee to continue living there. This is a decision that needs to be made carefully because it can cause future disputes in some families. Still, it’s a great alternative to a reverse mortgage.
5. Rent Your Property
Some people find renting out their property and moving into a smaller living space to be a great alternative to a reverse mortgage. It allows you to maintain your mortgage and save some money on housing. This is a simple way of maintaining ownership of your house and acquiring a fair share of money from it as well.
For More Advice on Your Refinancing Options, Contact All American Financial Services
If you want to discuss your options with a Lancaster refinance expert, All American Financial Services is here to help. Contact us today to schedule an appointment with one of our financial experts.