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The Pros and Cons of a Hard Money Loan

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Hard money loans are a way to borrow money outside of traditional mortgage lenders. These loans can help homeowners renovate their property or buy a second home, and real estate investors may find them perfectly suited for fix-and-flip operations. However, hard money loans often have short payoff timetables and higher interest rates, meaning they’re not ideal for every situation.

How do hard money loans work?

A hard money loan is a short-term loan secured by real estate, not credit. Unlike mortgages, which take a long time to underwrite, hard money loans can be secured quickly — making them a great choice if you’re in need of fast cash. The underwriting standards are typically less strict too because they’re issued through private lenders, not banks or credit unions.

That’s also why most hard money lenders specifically target real estate investors, who want to make quick offers on bargain properties. Some lenders won’t even work with traditional homebuyers, so if you’re looking for a mortgage alternative for an owner-occupied property, this may not be your best bet.

For a hard money loan, “the lender is at liberty to decide the circumstances under which they’re willing to make that loan,” said Tendayi Kapfidze, the chief economist at LendingTree, which owns MagnifyMoney. Each lender establishes its own requirements for credit scores, debt-to-income (DTI) ratios and loan-to-value (LTV) ratios and often, these standards are looser than what traditional mortgage lenders may require.

“Typically, the buyer puts up significant collateral, so if things go astray, the lender can recoup their outlay,” Kapfidze said.

For most types of hard money loans, that collateral is the same: your house. If borrowers default on their loan, the hard money lender will take and sell the home. That makes these loans riskier than standard mortgages.

Unlike traditional mortgages, lenders expect repayment much more quickly. Expect your hard money loan to last between 12 months and five years — but considering the high interest rates, you’ll probably want to pay off your debt as quickly as possible, anyway.

“The biggest difference with hard money loans is the interest rate,” Kapfidze said. “If you’re getting a mortgage backed by Fannie Mae, Freddie Mac or government interest rates, there’s a lower interest rate because of the perceived guarantee. There’s less risk for the lender.”

While the exact interest rate will vary by lender, borrowers may pay up to 15% annual percentage rate (APR), or more.

Hard money loans can help buyers a number of ways. Common loan types include, but are not limited to, the following:

  • Bridge loans, which help buyers “bridge the gap” between the current property they own and the property they hope to buy. A hard money provides short-term financing to help with the down payment and moving cost, which is typically repaid after closing.
  • Fix-and-flip loans, which help potential buyers purchase distressed properties intended for renovation and reselling.
  • Owner-occupied loans, which help consumers with poor or no credit buy a home.

Benefits of hard money loans

With high interest rates, short payment terms and your house on the line, you might be wondering why anyone would want a hard money loan. But there are a number of circumstances well-suited for these unique loans.

“If you’re not able to access a traditional loan, then maybe there’s an opportunity here,” Kapfidze said. For consumers who have difficulty obtaining traditional loans or for projects that don’t conform with traditional lenders’ requirements, a hard money loan may be necessary.

The benefits of a hard money loan are:

  • Speed. Buyers in need of funds fast may choose a hard money loan. Because the underwriting guidelines for hard money lenders are often less strict, and require less documentation, the loan can close quickly.
  • Lenient requirements. Have a low credit score? A tax lien on your house? Are you a foreign national struggling to establish U.S. credit? Underwriting standards for hard money lenders are significantly more lenient than traditional lenders.
  • Flexibility. Many hard money lenders provide funds from their own reserves, allowing them flexibility with the loan’s terms — especially in terms of the repayment timeline. Whether you want to repay the loan in six months or seek a longer-term period, lenders aren’t restricted to pre-established term sheets.
  • Leverage in the real estate market. For flippers hunting down bargain properties, finding fast funding is essential. Quick financing lets them snap up the perfect home for rehab before other buyers do.

Pitfalls of hard money loans

While hard money loans are ideal for a number of circumstances, these borrowed funds can be risky.

“If you’re unable to pay back the loan and you have your property as collateral, your lender has a claim on that property,” Kapfidze said. And while that may also be true with traditional mortgages, the high interest rate and quick payment schedule common among hard money loans might make your monthly payment sky-high.

Some of the major pitfalls of hard money loans include:

  • Higher interest rates. Even if you pay off your loan in full, you’ll end up paying a lot more interest than you would with a standard mortgage. For example, a $50,000 loan with a 15% interest rate and a five-year repayment plan will cost you more than $21,000 over the life of the loan.
  • Shorter terms. Repaying a large loan in five years or fewer means higher monthly payments. Understand how the true costs of your loan fit into your household or business budget before proceeding.
  • Little oversight. Unlike traditional mortgage lenders, hard money lenders experience little government oversight. Borrowers must take care to avoid unethical lenders looking to exploit desperate buyers.

When to consider a hard money lender

Still not sure if a hard money lender is right for you? Here are some circumstances where this loan might be a good fit.

  • You can’t find traditional financing — especially for an investment property. Many hard money loans are designed for real estate investors, not your average buyer looking to purchase an owner-occupied property. In fact, many hard money lenders won’t even lend to consumers. But if you’re looking to renovate an investment property and don’t meet traditional lenders’ requirements, a hard money loan may help you proceed.
  • You need money fast. These loans send funds more rapidly than a traditional lender. If the local real estate market is hot and you need cash quickly, a hard money loan may entice the sellers to choose you.
  • Your credit score is low. Your property serves as collateral for a hard money loan — not your creditworthiness. Buyers with extremely poor credit may not meet the requirements for a traditional loan, making a hard money loan their only choice.

Where to find reputable hard money lenders

A Google search will turn up hundreds of eager hard money lenders, but finding out which ones are reputable and which are not can be difficult. Talk to real estate investors in your area to learn about the best lenders nearby.

Ask any potential lender the following questions:

  • Do you only work with investors? If you’re hoping to use these funds for an owner-occupied property, a hard money lender that works exclusively with real estate investors won’t be a good fit.
  • What is the interest rate? If you don’t see interest rates outlined on the lender’s website, ask directly. You don’t want to be surprised by a high interest rate.
  • How will I repay the loan? Hard money lenders handle repayment in different ways. Some ask for interest-only payments, and some request full repayment at the loan’s end. Others work much like traditional mortgage lenders, with regular monthly payments throughout. Find out what each lender expects so you can be sure the repayment fits within your budget.
  • What fees will I pay? Get a thorough accounting of any fees you might pay, as well as any points you’ll be expected to pay. A “point” is an upfront fee, calculated as a certain percentage of the total loan that lets you lower your interest rate.
  • What happens if I pay the loan off early — or late? Some lenders don’t let you pay a loan’s balance early. And some charge additional fees if you pay any installments late. Know what your lender expects ahead of time.

Risks to look out for

Not everyone who labels themself a “hard money lender” is worth working with. Loan sharks may masquerade as a reputable lender — but their real goal is causing you slow financial pain before stealing your house from under you.

First, check your lender’s license. The Nationwide Multistate Licensing System offers information about licensing requirements for all 50 states, and allows you to search by lender to ensure its validity. Asking for your lender’s license number can help you weed out potential loan sharks, but it’s no guarantee.

Next, look at the interest rate: Each state has regulations limiting how high lenders can set this number. But loan sharks may not shy away from usury — the legal term for charging illegal interest rates. Knowing your state’s legal interest rate limits will help you avoid predatory loans. And pay attention to adjustable rates, too. Sure, the initial rate may be attractive, but soon it may rise dramatically.

Compare your payments amount to the interest. A common feature of subprime loans is a regular payment that doesn’t even cover the accruing interest. Over time, the amount due continues to grow. If regular payments won’t pay off your loan, you’re probably dealing with a shark.

Asking a real estate lawyer to look over your hard money loan contract is the best way to know you’re not being fleeced. And yes, you do need a contract. Don’t accept any money until both you and the lender have signed.

Alternatives to hard money loans

Just because you have poor credit doesn’t mean a hard money loan is your only option. If you’re looking to purchase a house, there are a number of federally regulated mortgage programs that offer lower interest rates and better terms. Consider looking for a loan through the Veterans Administration available for veterans or the Federal Housing Administration, which can help make owning a home affordable.

Other options include:

  • Home equity loans. These loans offer your home’s equity — or the difference between your home’s worth and how much you owe — in cash. Expect an interest rate of 4.5% to 6%, although underwriting standards will be stricter than those of a hard money lender. Home equity loans can help you afford a down payment or the kitchen renovation of your dreams.
  • Home equity line of credit (HELOC). A home equity line of credit works much like a home equity loan, except not all the money is provided up front. Think of it like a credit card: You can take out funds as needed and pay down your balance over time. Keep in mind these loans often have a variable interest rate, which goes up and down in tandem with the nationwide prime rate.
  • Cash-out refinancing. Much like a home equity loan, a cash-out refinance gives you funds equal to your equity — but it also replaces your current mortgage. That means you may end up paying a higher interest rate, depending on the current prime mortgage market.
  • Business line of credit. Plan on making it big as a real estate investor? A business line of credit gives you easy access to quick cash when necessary, helping you purchase affordable properties quickly.

If you need cash fast and don’t have the credit for traditional loans, a hard money loan may suit you, especially if you’re purchasing investment properties. But pay careful attention to the loan’s interest rates and repayment terms. Loan sharks may masquerade as hard money lenders, and signing the contract for one of their loans can leave you underwater. Before taking out a hard money loan, make sure there’s no other, traditional loan that suits your situation.

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jamie Wiebe
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Jamie Wiebe is a writer at MagnifyMoney. You can email Jamie here

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5 Questions to Ask Yourself Before Buying a House

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Buying a House

The housing market is heating up and so is the homebuying competition. Recent data from the National Association of Realtors show that pending home sales are up nearly 5%.

Still, don’t let the increased activity pressure you into getting a mortgage before you’re truly ready. Take inventory of your personal and financial preparedness first.

Step back and ask yourself the following questions before you start your homebuying journey.

Question 1 How much house can I afford?

Prior to your house hunt, be sure you have a concrete understanding of exactly how much house you can comfortably afford. A common way to determine affordability is to get a mortgage preapproval.

A preapproval is a letter from a mortgage lender that tells you how much money you might qualify to borrow for a home purchase along with an estimated interest rate. In order to get preapproved, you’ll need to submit several documents and other pieces of information to the lender, including:

  • A government-issued I.D. (e.g. driver’s license)
  • Social Security number
  • Pay stubs
  • Bank statements
  • Tax returns

The lender will also pull all three of your credit reports and scores to help determine your creditworthiness.

Getting preapproved for a mortgage not only gives you a price range to use when you start shopping for a house; it also gives you an advantage over other buyers, and legitimizes you when it’s time to put in offers.

Question 2 How long do I plan to live in the home?

Homeownership is a commitment. You’re committing to the mortgage you borrow, the home you choose and the surrounding community — this isn’t the case as a renter.

The financial commitment is just as real as the moral one. Financial experts commonly say it takes five years to make the money back you spent on your house, should you decide to sell it. Owners typically stay in their home for a median of 10 years before selling, according to the Homebuyer and Seller Generational Trends Report from the National Association of Realtors.

Question 3 Am I financially secure enough for homeownership?

Don’t focus solely on stashing away just enough cash to cover your down payment. Factor in the many other costs of buying and owning a home.

Before you’re handed the keys, you also have closing costs to pay. This could run you anywhere from 2% to 5% of your home’s purchase price — not to mention all the deposits and expenses related to moving in.

You’ll also want to have a sizable cash cushion for maintenance and unexpected expenses. Aim to have at least three to six months’ worth of your living expenses saved in an emergency fund, such as a personal savings account. Be mindful of how your expenses might change as a homeowner and tweak your savings amount to reflect those changes.

Another consideration is how you’re handling your current debt obligations. If you’re struggling to stay afloat as is, a mortgage lender likely won’t approve you. That’s because one of the main qualification factors a lender pays close attention to is your debt-to-income ratio, or the percentage of your income that is used to pay your debt every month. A good DTI ratio for all your debt payments, including your estimated monthly mortgage payment, is a maximum of 43%.

Question 4 Is my credit history positive enough?

You’ll need to demonstrate your creditworthiness as a potential mortgage borrower before you’re approved. Start by pulling your credit reports from all three credit reporting bureaus — Equifax, Experian and TransUnion — by visiting AnnualCreditReport.com. You’re entitled to one free report from each bureau once a year.

Review your reports for any negative remarks and errors. Do you have a history of multiple late payments? Are your credit card balances close to the limit? If you see room for improvement, you might need to postpone your homeownership goals until your credit profile is in a better position. Lenders want to see overwhelmingly positive credit habits from mortgage applicants.

You’ll generally want to have at least a 580 credit score to qualify for an FHA loan and a 620 score for a conventional loan. Read our guide on minimum mortgage requirements for more information on credit score specifics for other mortgage products.

Question 5 Which mortgage type is best for me?

There are several different mortgage products available and one may fit your financial situation better than others. For example, if you don’t have a lot of money for a down payment and have a credit score in the 600 to 700 range, you might want to go with an FHA loan, which requires just a 3.5% down payment. On the other hand, if you have at least a 5% down payment and a score above 700, you could benefit from a conventional mortgage.

There are also VA loans, which cater to military service members and veterans, USDA loans that focus on homes in designated rural areas and several other options. Speak with your lender to get a rundown of their available mortgage programs.

The bottom line

It takes some time and effort to decide to buy a home. To help in your decision, it’ll be worthwhile to develop answers to the above questions.

Once you’re ready to take that leap, shop around with multiple lenders to get the best deal. Data show that homebuyers stand to save more than $36,000 in interest on a $300,000 mortgage over a 30-year term by shopping around, according to LendingTree’s Mortgage Rate Competition Index.

Review the Loan Estimates you’ll receive from each mortgage lender after submitting your application to compare interest rates and the many other costs that come with borrowing.

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Crissinda Ponder
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Crissinda Ponder is a writer at MagnifyMoney. You can email Crissinda here

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Guide to Reverse Mortgages: Is the Income Worth the Risk?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Real estate investment. House and coins on table
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Although they have received increased attention in recent years, many consumers still have a hard time fully understanding what reverse mortgages are, how they work and who they benefit.

Continue reading for a thorough explanation on the above topics, plus a discussion of the advantages and disadvantages of this complex financial product.

What is a reverse mortgage?

A reverse mortgage is a loan that allows senior homeowners to borrow money against their home’s equity. Instead of making monthly payments to their mortgage lender, the homeowner receives money every month from their lender — or receives a larger amount in a lump sum. The balance owed to the lender grows over time and isn’t due until the homeowner moves out, sells the property or passes away.

Reverse mortgages are the opposite of a “forward,” or traditional, mortgage, which allows a borrower to purchase a home and repay their lender on a monthly basis. With traditional mortgages, the balance owed reduces over time until it’s completely paid off.

In both forward and reverse mortgages, the property is used as collateral for the loan. Only homeowners who are at least 62 years old can take out a reverse mortgage.

Reverse mortgage types

There are three types of reverse mortgages available to homeowners depending on their situation.

Home Equity Conversion Mortgage (HECM)

This is the most common reverse mortgage and is backed by the Federal Housing Administration (FHA). A HECM offers more flexibility in terms of how payments are disbursed to borrowers. Payment options include:

  • A single, lump-sum disbursement.
  • Fixed monthly advances over a specified period of time.
  • Fixed monthly advances as long as you live in your home.
  • A line of credit.
  • A combination of a credit line and monthly payments.

Single-purpose reverse mortgage

As the name suggests, this type of loan is used for a single purpose, such as covering home repairs or property taxes. Loan proceeds are typically distributed in a lump sum to cover the homeowner’s financial need. Single-purpose reverse mortgages are offered by nonprofit agencies and some local and state governments.

Proprietary reverse mortgage

This loan is offered by private lenders and usually benefits borrowers with high-value homes because they may receive bigger advances.

How a reverse mortgage works

A reverse mortgage is a loan that takes a portion of your equity and converts it into payments made to you. The money you receive is typically tax-free, according to the Federal Trade Commission. Unlike a traditional home equity loan, you are not required to pay back a reverse mortgage on a set schedule.

Let’s look at an example of how a reverse mortgage works:

John is retired, has paid off his mortgage and owns his home outright. He wants to stay in his home, but needs to supplement the monthly income he receives from Social Security and his pension.

The total amount John can borrow using a reverse mortgage is based on his age and that of his spouse, current mortgage rates and the home’s value; these limits are imposed by HUD. Here’s how the numbers could possibly work out for him, based on LendingTree’s reverse mortgage calculator:

Value of the home$300,000
Title holder’s age70
Mortgage balance$0
Lump sum estimate$145,902

Based on the calculator, John might qualify for as much as $145,902 if he decides to go the single disbursement route. An advantage of getting a lump-sum payment from your lender is that the interest rate will be fixed, unlike the other options which have an adjustable interest rate.

The reverse mortgage loan limit is $726,525 for 2019, which is 150% of the conforming loan limit of $484,350 for forward mortgages. Still, even if the amount of equity you have is lower than the loan limit, you won’t be allowed to borrow the full amount.

The amount you’re allowed to borrow for a reverse mortgage is determined by the age of the youngest borrower, the home’s appraised value and the anticipated interest rate. Generally, the older you are, the more you can borrow.

Costs and fees

The most common fees associated with a reverse mortgage include:

  • A loan origination fee, which could cost up to 2% of the loan amount.
  • An initial mortgage insurance premium, which is a flat 2% fee.
  • An annual mortgage insurance premium, which is 0.5%.
  • Housing counseling, which usually costs about $125.

There are also additional closing costs and interest fees.

Reverse mortgage requirements

Senior homeowners who are interested in borrowing a reverse mortgage must meet the following requirements:

  • Be at least age 62 or older.
  • Own your home outright or have a small remaining mortgage balance. If you still have a loan, a good rule of thumb is to have at least 50% equity in your home, because you’ll first need to use the reverse mortgage funds to pay off the outstanding balance on your forward mortgage.
  • Must be seeking a loan backed by your primary residence.
  • Have no federal debt delinquencies, including student loans and taxes.
  • Proof of sufficient income to cover your property taxes, homeowners insurance and other housing-related expenses.
  • Demonstrate your creditworthiness as a potential borrower. While there isn’t a minimum credit score requirement, it helps your case to be responsible with your credit usage by maintaining on-time payments, keeping your balances low, etc.
  • Participate in an information session with a HUD-approved reverse mortgage counselor.

Most reverse mortgages have what’s called a “non-recourse feature,” which means if the lender takes legal action against you due to default, the lender can only use the home to satisfy the defaulted debt and can’t come after you for any difference between how much you owe and the home’s value. This also applies to your heirs in the event you pass away and the home is sold to repay the debt.

4 things to watch for when taking out a reverse mortgage

Just like all other financial products, a reverse mortgage comes with its share of risks, which typically include the following:

Higher financing costs

Compared with a forward mortgage, the fees associated with a reverse mortgage are more costly. As an example, a HECM lender can charge an origination fee equal to $2,500 or 2% of the first $200,000 of your home’s value, whichever is greater, plus another 1% for any home value amount above $200,000. The maximum allowable origination fee is $6,000. By contrast, the average origination fee for a traditional mortgage is just under $1,000, according to data from Value Penguin, a LendingTree company.

Increase in debt

You receive income from a reverse mortgage, but it’s still a loan that you or your estate will be responsible for repaying. Since you’re borrowing from your home’s available equity, your loan balance increases over time, which adds to your outstanding debt load.

No tax deductibility

The IRS treats the income received from reverse mortgages as loan advances, and for that reason any interest paid on a reverse mortgage isn’t tax-deductible.

Rising interest rates

The majority of reverse mortgage products have an adjustable interest rate, which is subject to market fluctuations. Your rate will be at a high risk of increasing very quickly.

Reverse mortgage pros and cons

Consider the following benefits and drawbacks before applying for a reverse mortgage:

Pros

  • Increase in your monthly income. If you opt for monthly payments from your lender, a reverse mortgage gives you additional income every month on top of any retirement income you already receive.
  • Flexibility to use the funds how you see fit. If you take out a HECM or proprietary reverse mortgage, there aren’t restrictions imposed on what the money is used for.
  • Ability to stay in your home. Not only do you get to keep your home, but you can keep it in your family after you pass away if your estate is able to fully repay the reverse mortgage.
  • Free from underwater mortgage stress. If your loan balance becomes greater than your home’s value, you likely won’t be on the hook for the difference between the two.

Cons

  • High upfront costs. There are origination fees, mortgage insurance expenses and closing costs in a reverse mortgage transaction. If you choose to cover these costs with your loan, you’ll receive a smaller payout.
  • Decrease in your home equity. With a reverse mortgage, your loan balance grows and your available equity shrinks over time.
  • Loan becomes due if you have a change of heart. If you decide you want to move out of or sell your home, the outstanding balance on your reverse mortgage becomes due immediately.
  • Adjustable-rate mortgage. Most reverse mortgages have adjustable interest rates that will likely increase over time. As of January 2019, the latest month for which data are available, reverse mortgage rates range from 3.583% to 7.019%, according to FHA statistics.

Shopping for a reverse mortgage

The first few steps you should take when you decide you want to apply for a reverse mortgage are to educate yourself on how reverse mortgage programs work, and to determine which loan type works best for your financial situation.

Once you have those details figured out, gather multiple quotes from reverse mortgage lenders and compare the costs and fees to find the best deal available. Ask questions about any and everything that seems unclear, and don’t forget to consult a HUD-approved reverse mortgage counselor for extra help.

Consider the interest rate each lender charges, as well as the origination fee and other closing costs. Additionally, work with each lender to determine how folding the financing costs into your loan will affect the amount you ultimately receive and whether it makes sense to pay those costs out-of-pocket instead.

After you’ve closed on a reverse mortgage and — for some unforeseen reason — decide you no longer need it, you have a “right to rescission,” which means you’re allowed to cancel the deal without penalty. You have a minimum of three business days after the loan closes to notify your lender in writing, and the lender has 20 days to refund any money you’ve paid toward the financing of that loan.

FAQs about reverse mortgages

The timeline varies by lender, but the lending process could take two months or longer. Be sure to ask your loan officer for a rough idea.

No, interest paid on reverse mortgage balances is not tax-deductible.

When you pass away, your reverse mortgage becomes due and payable. If you have a surviving spouse or heirs, they will be responsible for paying back the loan, which might involve selling your house.

For HECM loans, you can find an FHA-approved lender through HUD’s website. For other types of reverse mortgages, a quick online search will reveal public and private lenders in your area.

Reverse mortgage alternatives

A reverse mortgage isn’t the best option for every senior homeowner. If you need money to fund renovations, repairs or other expenses, here are some alternative options.

Borrow a home equity loan or line of credit

If you have a sizeable amount of equity in your home, you might qualify to take out a home equity loan or home equity line of credit (HELOC). You borrow a lump sum of cash with a home equity loan and you’re granted a line of credit, similar to a credit card, with a HELOC. Either of these products might work better if you’re still employed, as they require you to make monthly payments after borrowing the funds.

Refinance your existing mortgage

For those borrowers who still have a mortgage balance, you could refinance your loan by extending the term and lowering your monthly payment amount, which frees up some cash in your budget. You could take advantage of a cash-out refinance, which allows you to borrow a new mortgage that’s larger than what you actually need for your house and pocket the difference.

Rent out a room

Empty-nesters with more home space than they actually need might benefit from renting out one of their bedrooms either through short- or long-term rentals. This generates extra income that can be used for remodeling, traveling or other expenses.

Don’t forget your retirement accounts

As long as you’re old enough to tap your 401(k), IRA or other retirement account without any early withdrawal penalties, going this route is a less costly way to supplement your income. Generally speaking, you can withdraw from your retirement accounts without penalty starting at age 59 ½.

The bottom line

Reverse mortgages come with additional considerations that may not always be a concern for forward mortgages, but they may provide relief for some older homeowners who want to supplement their income and also age in place.

If you can comfortably manage your insurance, tax and other obligations related to homeownership, maintain your property and keep it in good condition, and are confident that your heirs will take care of your home after your passing, a reverse mortgage could work well for you.

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Crissinda Ponder
Crissinda Ponder |

Crissinda Ponder is a writer at MagnifyMoney. You can email Crissinda here

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