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What Is The Difference Between A Reverse Mortgage And HELOC?

April 22, 2021

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The number of financial products available to senior homeowners is growing. Access to home loans, credit lines, and reverse mortgages appears to be improving. But which is the best option for you? Are there any hybrid programs that can give property owners more of what they want?

Rising Expenses & Uncertainty

Love it or not, we’re all getting a little older. Our parents are too. That means rising expenses. For most, it certainly means rising healthcare costs. For those retiring there is a lot of free time to fill, and a lot of aspirations for filling that space.

At the same time, more seniors are finding their kids aren’t financially supporting themselves. Fortune and The Pew Research Center reveal that even though unemployment for young adults has dropped to around 8% in mid-2015, even fewer are now living independently than in 2010 (just 67%). Yet, financial expert Dave Ramsey warns that “the biggest expense facing baby boomers today is not their children's college bills, but parent’s elder care.”

Many retirees are finding they are far less flush than expected too. The stock market hasn’t been kind and is still estimated to be around 60% overvalued. At the same time, the Social Security Administration continues to warn that there isn’t going to be enough money to pay out what is due.

Thankfully trillions are being regained in home equity. Yet, many Americans are finding they are house-rich, and cash poor again. Liquidity and cash are key to surviving and enjoying the next few years.

So what are the best ways to tap into overrated and underutilized home equity?

Conventional Mortgages, Second Mortgages & Credit Lines

The Mortgage Bankers Association and Mortgage Credit Availability Index show that access to home mortgage credit has been rising since February 2012. Inman News credits this largely to the expansion of mortgage programs.

Conventional mortgages, second mortgages, and home equity lines of credit (HELOCs) are all options. Yet, the traditional versions of these loan programs come with a number of challenges and disadvantages for older homeowners.

Most notably this includes:

  1. Difficulty in qualifying for home mortgage loans
  2. The need to consistently generate income to pay mortgage payments
  3. High-interest rates on 2nd mortgages
  4. Potential for lenders to cap or close credit lines during housing downturns
  5. Leaving large debts, and monthly financial obligations for heirs

What is a HECM?

A HECM is the FHA reverse mortgage program. This is a federally guaranteed and sponsored Home Equity Conversion Mortgage. It allows homeowners aged 62 and older to convert illiquid home equity to liquid, usable cash, and credit.

The real beauty of this financial tool is that it pays the homeowner, versus the reverse.

Reverse mortgages can be obtained which payout consistent, equal monthly payments to owners over time. Other reverse mortgages provide a single upfront lump sum payout.

One of the newest and most flexible options is the credit line reverse mortgage. Eliminating the dilemma between HELOC vs. reverse mortgages there are even hybrid options that can offer a lump sum or fixed payouts in addition to a flexible credit line reverse mortgage.

Highlights of a Reverse Mortgage Credit Line include:
1. Built-in Growth feature which consistently adds more access to equity
2. Cannot be taken away during market downturns
3. Can be paid into, and used as a revolving credit line, so that interest is only levied on equity used at any moment
4. Can be set up in early retirement years, and reserved for future increased liquidity, while maintaining just a minimum of a $100 balance
5. Can be used to avoid taking out money from investment accounts during market downturns

Your reverse mortgage credit line cash can be used for any purpose from debt consolidation, to golf and boating, to helping kids and parents, gifts for the grandkids, investing, and covering medical bills. Or just keep it as a reserve fund. It’s your money – you choose.

Find Out More…

Having more liquidity is a pressing issue for millions of Americans today. Traditional mortgages and HELOCs can sometimes be more of a nuisance and threat than a benefit for aging homeowners. In contrast; a reverse mortgage credit line can help property owners stay ahead of their financial needs without increasing their burden. It’s your money. Make sure you are making the most of it!

Call Angella at 949-267-3409 to see what you are entitled to today.

Claim your free reverse mortgage information package at Angellaconrard.com, where you can find out more about your options and even live chat with a reverse mortgage expert…

Angella Conrard profile picture
Angella Conrard
I am designated a Certified Reverse Mortgage Professional by the National Reverse Mortgage Lender's Association. I work exclusively with reverse mortgage loans in nine states. I have a passion for helping my clients. I think everyone can and should live their most comfortable life. I am the founder of the National Aging in Place Council- Orange County, California, emeritus. I've practiced yoga all my adult life and am strongly interested in health and well-being. I am a lifetime helper.
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I am designated a Certified Reverse Mortgage Professional by the National Reverse Mortgage Lender's Association. I work exclusively with reverse mortgage loans in nine states. I have a passion for hel...
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