What Seniors Must Know
Seniors can release equity from their home to receive the funds for a variety of reasons. The most common one is that they need money in order to live and pay for basic needs such as food, shelter, and healthcare. Equity release helps them get out of debt faster than other methods like reverse mortgages or 401(k) loans because it offers immediate access to the cash needed now. We will walk you through what is equity release so that you can decide if it is right for your situation!
The first step in understanding equity release is to know what it actually is. Let’s start with the basics: an equity release loan gives seniors access to their home’s value that has accumulated over time and been building up as part of a traditional mortgage. In other words, they can choose from two options. The first option is for them to take out a lump sum payment which will be added onto their outstanding balance on the house resulting in more interest payments later down the line but immediate cash today (this method requires borrowers to have at least 20% of equity).
The second option allows them to withdraw funds monthly via check or direct withdrawal until all remaining debt has been paid off. Seniors also need assets outside of their home such as savings, investments and pensions in order to qualify. The next section will discuss what options are available to seniors who want equity release in their home because every situation is different!
First, let’s talk about reverse mortgages. Reverse mortgages have been around for a long time which means that there is plenty of data on the subject. For example, we know that less than 30% of applicants get approved by an institution due to strict underwriting guidelines (the practice where lenders look at borrowers’ credit history). We also know how much money they receive with each type of loan: HECM loans allow them to take out up $50k or 40% of their property value.