It is possible for a person to end up in a situation where they have a lot of money in a home but don’t have a lot of money in the bank. If you have been paying off your mortgage for years, your equity in the home could amount to a lot of money. But that isn’t money you can use without making significant financial changes. And just because you have a high-value home, it doesn’t mean that you have a lot of cash on hand for expenses. If you are about to head into retirement and you are concerned about the amount of cash you have on hand, this article will give you a couple of options for what you can do to adjust your financial situation.

A Reverse Mortgage

If you’d like to utilize your home’s value for cash flow, a reverse mortgage is an option but requires careful consideration. A reverse mortgage is a loan that allows a homeowner to borrow against the value of their home. It allows the homeowner to receive payments monthly, as a lump sum, or as a line of credit. The money paid out from this loan is then due back when the borrower dies, moves out permanently, or sells the home.^[1] This can be a way to create cash from your equity, but it isn’t a great option for everyone. It has many restrictions. Some of those restrictions are:

1. You must be 62 years old or older.^[2]
2. You must either own your home or have a substantial amount of equity in the home.^[3]
3. You must pay various fees and premiums to set up and maintain the reverse mortgage.^[4]

A Home Equity Loan
 
A home equity loan is another option if you find yourself with a lot of money in equity and not a lot of money in cash. This is a more traditional loan, and the value is based on the difference between the homeowner’s mortgage balance due and the home’s current market value. Unlike a reverse mortgage, a home equity loan requires monthly payments.^[5]

Talk with a Financial Advisor
 
A financial advisor can look at your unique financial situation and figure out your risks and paths forward. They can help guide you through all your possible options. Financial advisors have expertise in a variety of subjects, from investment strategies to tax strategies, and they can provide you with the information you need to make big financial decisions. If you are interested in working with one of our experts, don’t hesitate to reach out to us for a complimentary review of your situation.