The answer is based upon your credit and income. With both a reverse mortgage line of credit and a HELOC, the borrower must continue to pay their real estate taxes and insurance. A HELOC and a reverse mortgage line of credit are both adjustable rate loans.
Advantages of HELOC line of credit
- HELOC requires good credit and most times some proof of income.
- HELOC, the borrower can usually pay interest only for a period of time typically 10 years, after then the balance must be paid off over 20 years.
- HELOC requires interest payments must be made.
- HELOC will provide more cash over with most likely a lower interest rate but you must qualify which can sometimes be difficult due to income requirements.
- Interest on most home equity borrowing is tax deductible.
Advantages of Reverse Mortgages
- If your planning on staying in your home for a long period of time, it’s an excellent option. If your moving in the short term it may not be in your best interest for the short term.
- A reverse mortgage line of credit is guaranteed and cannot reduce the amount. With a HELOC, the bank can reduce or close the credit line at any time if not actively used.
- A monthly mortgage payment is never required where a HELOC you must make the required monthly payment.
- Not concerned about passing money down after you pass. Dying with a one million dollar home is not efficient when you could have spent money having fun.
- The upfront costs with a reverse mortgage are significantly higher than with a HELOC so staying in your home for a longer period of time is an advantage.
Our loan advisers can help explain and guide you through these questions and choices. Contact us so we can help you with the best choice.