The number of financial products available to older homeowners is growing. Access to home loans, lines of credit, and reverse mortgages appears to be improving. But what is the best option for you?

Increasing Expenses and Uncertainty

Many older homeowners have a steady income. The challenge many face is that expenses, like healthcare, are not fixed. Health care costs are certainly not fixed.

At the same time, more boomers and seniors are finding that their children are not financially self-supporting. Fortune and The Pew Research Center reveal that even though young adult unemployment fell to around 8% in mid-2015, now even fewer are living independently than in 2010 (just 67%) . However, financial expert Dave Ramsey cautions that “The biggest expense baby boomers face today is not college bills for their children, but caring for parents of the elderly.”

Many retirees are finding that they are also much less aware than expected. The stock market has not been kind and is still estimated to be 60% overvalued. At the same time, the Social Security Administration continues to warn that there will not be enough money to pay what is owed.

Fortunately, trillions in home equity are being recovered. Yet many Americans are realizing that they are home rich and cash poor again. Liquidity and cash are key to surviving and enjoying the years to come.

So what are the best ways to leverage underutilized home equity?

Conventional mortgages, second mortgages and lines of credit

The Mortgage Bankers Association and the Mortgage Credit Availability Index show that access to home mortgage credit has increased since February 2012. Inman News attributes this in large part to the expansion of mortgage programs.

Conventional mortgages, second mortgages, and home equity lines of credit (HELOC) are all options. However, traditional versions of these loan programs present a number of challenges and disadvantages for older homeowners.

In particular, this includes:

1. Difficulty Qualifying for Home Mortgage Loans

2. The need to consistently generate income to pay the mortgage payments

3. High interest rates on second mortgages

4. Potential for Lenders to Limit or Close Lines of Credit During Real Estate Recessions

5. Leave large debts and monthly financial obligations for the heirs.

How do HECM reverse mortgages work?

A HECM is the FHA reverse mortgage program. This is a federally sponsored and guaranteed Home Equity Conversion Mortgage. Allows homeowners age 62 and older to convert illiquid home equity into liquid, usable cash and credit.

The real beauty of this financial tool is that it pays the owner, rather than the other way around.

Reverse mortgage payments are flexible and can be customized to your personal needs.

Your funds can be taken as a lump sum, monthly payments over a specified period of time, monthly payments over your life, drawn from a line of credit, or a combination of these options.

The most flexible option is the line of credit.

The highlights of a reverse mortgage line of credit include:

1. A built-in growth feature that constantly adds access to more funds over time.

to. A reverse mortgage line of credit grows at a compound rate (interest rate + 1.25%)

B. Any payments made to your principal balance will also increase your credit line by the same amount. Increasing your line of credit will grow at the compound interest rate, giving you more money to use in the future.

2. A reverse mortgage line of credit is ‘open credit’, you can borrow or pay back money without penalty.

3. Once established, your line of credit works regardless of your home equity and your loan balance.

4. It cannot be removed during market downturns (as long as you meet your contractual obligations, such as paying property taxes and homeowner’s insurance).

5. It can be established in early retirement years and reserved for greater future liquidity, maintaining only a minimum balance of $ 100.

6. Can be used to avoid taking money out of investment accounts during market downturns or used instead of taking Social Security income until your benefits are maximized.

The cash from your reverse mortgage line of credit can be used for any purpose, from paying credit card bills, doing home repairs, helping children and parents, gifts for grandchildren, investing, and covering medical bills. Or just save it as a reserve fund. It’s your money, you choose.

Know more …

Having more liquidity is an urgent problem for millions of Americans today. Traditional mortgages and HELOCs can sometimes be more of a nuisance and threat than a benefit to older homeowners. Unlike; A reverse mortgage line of credit can help homeowners stay ahead of their financial needs without increasing their burden. Is your money. Make sure you get the most out of it!

Check out the Reverse Mortgage Calculator to see what you’re entitled to today.