For retirees in a financial tight spot, a home equity line of credit or borrowing against an existing home equity line of credit can provide a short-term solution. If you are at least 62 with a home that is not heavily mortgaged, a reverse mortgage is another option.
A reverse mortgage gives you tax-free cash. No repayments are due, until you die or move out of the house.
However, these loans are expensive. In addition, reverse mortgages aren’t for those people who want to give their home to heirs, because most or all of the home’s equity may be eaten up by the loan principal and interest.
Fed Week’s recent article entitled “Considerations for Borrowing in Retirement” explains that reverse mortgages work best for seniors who need cash, who want to stay in their homes and who have few other options.
These HECM reverse mortgage loans are insured by the Federal Housing Administration (FHA). They let homeowners convert their home equity into cash with no monthly mortgage payments.