Have you amassed a significant amount of equity in your home? If so – well done! Building equity does not happen overnight; it is a lengthy process that can be affected by external factors like the housing market. However, building equity in your home is an extremely wise pursuit. While some call house payments a “forced savings account, “it can pay off significantly in the long run. People often make the mistake of assuming that selling their home is the only way to reap the benefits of amassed equity. This can be a cause of concern for those who wish to stay in their homes for many years to come. They worry that they may experience a reduction in equity, thus losing the value they have worked so hard to achieve. Equity reduction can occur quickly, for instance as a result of fluctuations in the economy or the real estate market.
If you own your home, or have paid off the majority of your mortgage, but do not plan on selling it anytime soon, it is crucial that you preserve your accumulated equity. There are a number of programs and loans that can help you access or maintain it. However, they are not all created equal, and many of these options pose a high level of risk for those who choose them. It is important to get all of the facts and select the right option for you before taking any kind of irreversible action.
What to Avoid
When people look into preserving equity, they will likely stumble upon the suggestion of a second mortgage. A second mortgage entails taking out an additional loan on a home that is already mortgaged. While this can technically help preserve equity in your home, a second mortgage can also leave you vulnerable to losing equity. This is because second mortgages are paid out in a lump sum. In the unfortunate event that your home loses value, you will be left owing more money than it is worth. What’s more, if you fail to meet the payments on this additional loan, the lender can legally foreclose on your home – even if your primary mortgage is not in default. For these reasons, a second mortgage is an exceedingly risky proposition.
What to Look For
If you wish to access your home equity while preserving it at its current level, there are a few things to look for:
- First, you must find a loan that will not create the possibility of owing more than the value of the property.
- Second, you will want a loan that allows your name to stay on the title of the house.
- Third, you should seek a loan with tighter lending limits that will help preserve the revenue stream.
A Reverse Mortgage meets all of these criteria and more. They are a much more frugal alternative to second mortgages, and many plans are even insured by the U.S. Federal Government. If you are looking to preserve your equity, they are a fantastic choice.
Learn About Reverse Mortgage Benefits For Your Retirement
Would you like to learn more about how you can access and maintain your equity with a Reverse Mortgage? Contact Retirement Home Equity Advisors today located in Gilbert, Arizona. We are a team of licensed specialists serving senior homeowners throughout the States of Arizona, California, and Colorado. We can help you strategically leverage your home equity to decrease risk and improve financial stability throughout your retirement.
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