Reverse Mortgages vs. A Line of Credit – Which is Right for You
For many elderly Americans, the golden years are fraught with concerns over money instead of spent
sitting on the front porch sipping iced tea. Social Security does not provide the average retiree enough
income to live on comfortably. Employer sponsored pensions and retirement accounts are virtually
unheard of anymore. If an elderly individual has an unexpected emergency or a costly illness, what little
funds they were able to save for their retirement may be gone in a relatively short amount of time. One
option is to take out a reverse mortgage. Although similar to an equity line of credit, a reverse mortgage
offers some important advantages that an equity line of credit does not.
Both an equity line of credit and a reverse mortgage take advantage of the equity you have built up in
your home. For a reverse mortgage, you will need to owe very little, or own the home outright as a
general rule. For example, if you own a home worth $150,000 and you only owe $25,000 on the home,
you could qualify for either an equity line or credit or a reverse mortgage for close to $125,000. The
main difference between the two options is that an equity line of credit requires the borrower to make
monthly payments on the debt as soon as it is disbursed whereas a reverse mortgage does not become
due until the borrower no longer lives in the home or dies.
Another difference is that with an equity line of credit, the borrower is given a credit line against which
he or she can make purchases or pay debts. With a reverse mortgage, the borrower may be able to elect
a credit line, monthly payments, or a combination. In other words, you can choose to have the bank
make payments to you each month instead of the other way around.
One important thing to keep in mind when you take out a reverse mortgage is that it will impact your
estate plan. When you die, the debt will have to be paid by your estate which will leave fewer assets to
pass on to beneficiaries.
Experienced estate planning attorneys St. Louis MO of the Purcell and Amen, Attorneys at Law – Your
Estate Matters, LLC offers estate planning and business planning resources to residents of St. Louis MO.
To learn more about these free resources, please visit http://www.yourestatematters.com today.