Compare Your Options: common questions
Each answer links to the guide it comes from, with sources.
Which option is cheapest?
It depends on your rates and fees. The CFPB notes that a home equity loan or HELOC might be a cheaper way to borrow than a reverse mortgage, whose closing costs are typically higher, but those loans have monthly payments and depend on your income and credit.
How much can I take out with a cash-out refinance?
It depends on the lender and the loan program. For loans Freddie Mac buys, a cash-out refinance on a one-unit home you live in can be up to 80% of the home's value.
Does a HELOC change my first mortgage?
No. A HELOC sits on top of your existing mortgage as a second loan. You keep paying your first mortgage as before, plus the HELOC.
Do I make monthly payments on a reverse mortgage?
Not on the loan itself. You repay it all at once when you no longer live in the home. You still pay property taxes, homeowners insurance and upkeep.
Can I cancel either one after signing?
Usually, yes. Most reverse mortgages, and HELOCs on the home you live in, come with a three-day right to cancel after closing.
Can I get a lump sum from a reverse mortgage too?
Yes, a lump sum is one way a reverse mortgage can pay out. The difference is that you don't make monthly payments on it, and the balance grows instead of shrinking.
What if I can't keep up with taxes and insurance?
With a reverse mortgage, the CFPB warns you could face foreclosure if you run out of money to pay property taxes, insurance or other housing costs. With a home equity loan, missing payments can also lead to foreclosure.
Back to compare your options, or try the reverse mortgage calculator.