Ways that a Reverse May be Better than a Bridge Loan
The modern era has seen a new phenomenon not previously experienced in this country. People are waiting a bit longer to get married and have children. Gone are the days of individuals marrying at 20 or 22 and having a couple of kids by 28. Now, people may not get married until they are almost 30 and then have kids. The longevity of the Baby Boomer generation means that these people in their 30’s and 40’s are now trying to raise their own kids while also caring for their elderly parents. This situation has led many people to either buy one large house to combine with their senior aged parents or help their parents buy a home very close to them. For these families a reverse mortgage is usually a better idea than a bridge loan.
Simple to Qualify
First of all, it can sometimes be tough to qualify for a bridge loan. The loan is risky because you are borrowing on two pieces of property at the same time and then hoping someone will purchase one property. In contrast, a reverse mortgage is simple. People who are over the age of 62 qualify if they own a home either debt free or close to being paid off. No income verification, no credit history review and none of the other typical mortgage requirements are needed.
Use Cash to Purchase New Home
Since the reverse mortgage offers a lump sum payout (as a line of credit), seniors can get a large amount of money to use towards the purchase of the next home. This allows them to become a cash purchaser. Using cash to buy a home makes the whole purchase process a lot easier on everyone involved. If the previous home did not provide enough equity to completely pay for the new home, it should offer enough to cover 50% to 75% of the purchase price, resulting in a small new mortgage.
Rent out the Old Home or Sell it, Your Choice
The old home that was used to finance the purchase of the new home can now be rented out. Or, it can be sold. The choice is up to you. Obviously, renting out the old home will provide more cash flow that could help with living expenses, medical bills or other debt. However, unlike a bridge loan, it is not mandatory to sell the old home.
A reverse mortgage really is a great way for today’s adult to help their parents downsize or move in to a home that is closer.