If you are a 62 years old or older homeowner within Laguna Hills Real Estate, you are entitled to convert your home’s equity into cash to spend for daily expenses, health insurances, home remodel and whatever else you need. You have two options to convert your home’s equity into cash. First is reverse mortgages and second is home equity loan. These two options allow you to use your home equity for cash without selling it or moving out your home. These are the two different loan options you can use but it pays to understand both of them before deciding which is better for you.
Reverse Mortgages
Most of the home purchases are being done with a regular or forward mortgage. When you use regular mortgages, you borrow cash from your lender and you pay debts monthly. Over time, your debt decreases and your equity increases. When you pay off the mortgage, you own the house outright and you will have the full equity on hand.
In the case of reverse mortgages, the lender makes payments to you instead of you making payments to the lender. That is why, it is called reverse mortgage. The lender will pay to you based on your house’s value. Over time, your debts will increase and your equity will decrease as the lender buys more and more of the equity. You may continue to hold the title unless you fail to pay your property taxes, you will lose your home. The loan will become due.
Remember that if both spouses have their name on the mortgage, the lender cannot sell the home as long as the surviving spouse is still alive. Couples or senior homeowners should investigate this issue first before they agree to tap a reverse mortgage for their home equity.
Home-Equity Loans
Like reverse mortgages, home-equity loans will also let you convert your equity into cash. It is sometimes called a second mortgage. You will receive your loan as a single lump-sum payment of the equity, and you pay the loan, with principal and interest, on regular basis.
HELOC
Another type of home-equity loan is called HELOC or home equity line of credit. With this type of credit, you have the opportunity to borrow money up to an approved credit limit. You will pay interest only on the money you actually borrowed, not the entire loan amount. HELOCs are adjustable loans, your interest rates will change as it fluctuates over time. Unlike reverse mortgages, the interest, which usually is an interest only payment, on the home equity loans and HELOCs are tax-deductible. This is an important point to note when choosing this option, your home will remain an asset to you and to your heirs.
If you have difficulty in understanding these terms and loan options above, you may speak to our professional realty expert. Our experts will help you understand the option that meets your needs and needs of your heirs. So, if you live near Aliso Viejo, Laguna Beach, and Laguna Hills, give us a call today. We would like to speak to you.