Many retirees have trouble choosing between a home equity line of credit (HELOC) and a reverse mortgage. While HELOC loans are more widely available, reverse mortgages can only be taken out by homeowners over the age of 61.

A recent release on Fox Business explains:

“Reverse mortgages have become an increasingly important financial tool for people 62 and older who want to remain in their home and fund their retirement. And, with 78 million Baby Boomers approaching retirement, interest is expected to grow. Despite this, many Americans are still unclear about how reverse mortgages work and when they may be appropriate.

“A reverse mortgage is a loan secured by the value of a house, where no repayment of the loan is required until the borrowers permanently vacate the home,” explained Peter Bell, president of the non-profit National Reverse Mortgage Lenders Association. “Although historically, this has been of particular interest to those with limited sources of liquid income, these days, there are many new retirees considering a reverse mortgage as an option after looking at all the other assets they’ve accumulated. This tool can help a person avoid taking Social Security too early or defer taxable withdrawals from IRA or 401(k) balances.”

There’s no easy answer to this dilemma. Homeowners faced with deciding between a HELOC and reverse mortgage should consider their individual circumstances and consult a financial adviser if necessary.

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Tags | Heloc, home equity line of credit, reverse mortgage