Your Money: Pros and cons of reverse mortgage vs. home equity line of credit

Is a reverse mortgage right for you? Vested Land Services can help.

Karin Price Mueller writes a great column for the Star-Ledger where folks get to ask a finance or business related question.  One that intrigued me this week was this:

Q. I don’t get it. When people own their home, wouldn’t it be more advisable to get a home equity line of credit or loan than a reverse mortgage? At least a HELOC is low interest (right now) and tax deductible! If anything happens to the owner — death, bankruptcy — the funds are deducted from the sale of the house. Right?

— Curious

It's a good question because a lot of mystery surrounds reverse mortgages.  Frankly, they are not for everyone.

Here's part of the reply to Curious:

The major difference between a reverse mortgage and a home equity loan or line is that with a reverse mortgage, no payments are made by the homeowner while the homeowner remains in the home, said Howard Hook, a certified financial planner and certified public accountant with EKS Assoc. in Princeton.

Compare that to home equity loans, which are typically are amortized over a period of time whereby principal and interest is paid by the homeowner, he said. A HELOC requires interest to be paid for a period of time, and then at some point, both the principal and interest will be amortized.

I recommend you read the full column here.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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