For borrowers inclined to seek alternatives to reverse mortgages, shared equity investments may offer a way forward when aiming to avoid traditional methods of leveraging equity such as selling the home and moving into. a new one. However, for borrowers with enough equity to qualify for a reverse mortgage, it is still a viable option for those looking to increase their cash flow in retirement. This is what nationally unionized columnists Ilyce Glink and Samuel J. Tamkin say in a column published in the Washington Post.
âReverse mortgages have been around for over 20 years. The concept is appealing: if you are over 62 and have equity in your home, there are a number of lenders who will grant you a loan for a certain percentage of the available equity (often up to 85. %, but sometimes quite a bit less), âreads the Washington Post column. “The loan provides you with money and no obligation to repay the loan until the house is sold or the owners die.”
However, if for some reason a reverse mortgage does not work or is not an appropriate option for a particular borrower, alternative options – including traditional and non-traditional varieties – exist for the elderly to strengthen. cash flow in retirement.
âIt looks like you needed cash, maybe didn’t qualify for a home equity line of credit, and turned to a reverse mortgage as a way to secure the funds you had. need, âthe duo told reader WaPo who asked about their own reverse mortgage. âThe problem is what you are now facing: You had a house with no great equity, you took what you could, and now you have used up your cash and you have no options for getting more. “
The most common recommendation the couple give to these locals is to sell the house, the easiest and most direct way to access the value that has accumulated in the house but which forces the person to leave the house.
âOften, older people are reluctant to move,â the couple wrote. âIt’s a lot of physical and emotional work to go through and throw away years (or decades) of accumulated stuff, or they just can’t imagine the idea of ââfixing the property to sell the house quickly. Staging a house is not easy, especially if the house in question has not been updated for a long time, which often happens when homeowners are strapped for funds.
However, new alternatives worth exploring for these situated seniors could be shared equity investment products, the pair said.
âHometap, for example, invests in property in exchange for an equity stake in your home. Currently offered in 15 states, the company is taking an equity stake in the property, betting against the future value of your home, âthe couple wrote. âThis product works like a shared appreciation mortgage: you get the money today, you don’t have to pay anything back, and then when you sell, the company gets its equity value from the product. If the house has increased in value, it gets a little extra. If it loses value, it becomes less.
Late last year, at an event hosted by RMD, Jeffrey Glass, CEO of Hometap, described his organization’s relationship with the reverse mortgage industry as potentially complementary rather than directly competitive.
“[Ours] is a fairly similar product. In my opinion, while they share a very similar high level goal of helping a homeowner see money without having to make monthly payments, investing in home equity is really very different â , said Glass. âI think it’s important to understand that generally this is a lump sum payment that is made up front. There is no interest rate. And in fact, the final settlement with the business is based on the future value of the house.
Read it column at the Washington Post.