How to Tap Into Your Home Equity
Have you ever heard about reverse mortgages? This is a loan that does not have to be paid back yet the bank is willing to lend you money because of the equity you have in your home. As long as you are over 62 years of age, you get to enjoy all these benefits. Is this loan as good as it sounds or are there catches involved? First of all, the loan does have to be paid back in some situations such as your death, transfer of home ownership, failure to pay taxes or a move. Moreover, you must have a certain amount of equity in your home and only then will you be granted a loan. Despite these traps, the loan may be suitable for some of you, but not for everyone.
If you cannot get a reverse mortgage, can you still tap into the equity of your home? The following options do allow you to do this. Compare them with reverse mortgages and then pick the most suitable one for your circumstances.
Refinancing is a good option if you have enough money to bear the costs that arise. According to a survey, the closing costs associated with refinancing are around $3,700. If you can afford this much, and want to stay in your house for a certain period, refinancing is a great option. Get a favorable inertest rate and your monthly payments will go down. Plus, your house will still be your asset unlike a reverse mortgage.
Home Equity Loan
If you get a home equity loan, you can have a lump sum of money that is limited by a certain amount, which varies with every lender. Over the next few months, you will have to pay back this amount through monthly payments. As with every loan, there are interest and fees involved. The interest rate is usually fixed and the fees are not that high.
A home equity loan is a good choice if you are sure you can make the monthly payments. Fail to do this, and you may have to face a foreclosure.
If you sell your house, you can no longer stay in the home, but you will still have access to the equity. You can go for this option if you are facing excessive repair costs or your house is to big for your current needs.