Home remodels and renovations can bring new life to your space, but at what cost? It can be difficult to afford to work on your house, even if you don’t have a lot of debt left on it. One option that some people can tap into is a reverse mortgage.
What Is a Reverse Mortgage?
A reverse mortgage is a type of extension to your existing mortgage loan. With a reverse mortgage, you’re borrowing against the equity you own in your home to get cash in hand for whatever you need.
Reverse mortgages, also known as Home Equity Conversion Mortgages (HECMs), are not available to every homeowner, but they can be a useful tool for some.
Reverse Mortgage Eligibility
To be eligible for a reverse mortgage, you have to meet the eligibility requirements. You have to:
- Be at least 62 years old
- Live in your home as the main resident
- Own at least 50% equity in your home
- Keep your home in good condition
- Not have any outstanding federal debt
Depending on the loan provider, you may have some specific requirements that differ from the list above, but these are the basics.
Reverse Mortgage Alternative
If you don’t fit the eligibility criteria for a reverse mortgage, you may be able to benefit from a similar loan that allows you to tap into your existing home equity. Reverse mortgage alternatives include:
- Home equity line of credit (HELOC)
- Cash-out refinance
- Home equity loan
All these loan types also require you to owe a certain amount of home equity to be eligible, but they may not come with the same requirements as a reverse mortgage.
When to Consider a Reverse Mortgage
While it sounds like a terrible idea to make your mortgage bigger, there are many scenarios where these loans make sense. The main reason people get these loans is to use the cash to make improvements to the house.
Renovations are costly, even if you’re doing DIY projects at home. Having the extra cash from a reverse mortgage makes it easier to manage.
7 Ideas for Projects to Use Your Reverse Mortgage Money on
You can do anything with your reverse mortgage payout, but since you’re extending your mortgage it’s best to use it on something important or necessary. Here are 7 ideas on good ways to use your reverse mortgage money.
Kitchen Remodel
The kitchen is the heart of the home. A kitchen remodel makes an immense impact on your home, especially if you haven’t upgraded anything for years.
Doing a kitchen remodel properly can be costly. Your reverse mortgage will be put to good use for a significant remodel like this that would be difficult to afford otherwise. Because a kitchen remodel can increase the property value, it’s an investment that’s usually worth making.
Accessibility Upgrades
Your home should grow to fit your needs as you get older. If you have needs that your home doesn’t accommodate, a reverse mortgage can be helpful to make your home more accessible.
Accessibility projects tend to be costly. Because they’re very important for your quality of life, it’s still important to make these upgrades when possible.
Examples of accessibility projects include:
- Widening doorways
- Upgrading restrooms
- Installing stairway chair lifts
- Building entryway ramps
Whatever you need to live your life comfortably, it can be a good investment to keep your home useful well into the future.
Roof Replacement
Roofs rarely need to be replaced, but when they do… ouch. If you’re not prepared to handle the cost of a roof replacement, a reverse mortgage can make it possible when it’s not in the budget.
Fixing up your roof is a great long-term investment in your home. A new roof will last for decades if it’s properly maintained.
Garden Installations
Fixing up the garden and adding new landscaping or gardening installations is a great quality-of-life upgrade. Raised garden beds are one of the best ways to spruce up your garden and give you space to grow without the stress of having to get down on the ground all the time.
There’s a lot you can do in the garden with a relatively small budget. You can add paths around the house to make it easier to navigate, install new garden fixtures, put up outdoor lighting, improve the landscaping, and generally make your garden more beautiful.
Efficiency Improvements
One home investment that can really pay off over time is making your home more efficient. Older homes are particularly inefficient with poor insulation, outdated HVAC systems, and old doors and windows. With a few improvements in these areas, you can decrease your power consumption and reduce your monthly bills by a lot, especially in seasons with extreme temperatures.
Make sure you’re opting for upgrades with long-lasting impacts that will be noticeable in your budget. Don’t search for the cheapest option. Look for what will help you the most over time and will make a permanent difference in your home.
Aesthetic Enhancements
If you’re going to be spending a lot of time at home, you may as well make your home beautiful. Painting inside, redecorating, changing out the furniture, refinishing the floors, and other indoor aesthetic upgrades can all improve your space and make it more pleasant to look at.
Having a beautiful space to live in helps you feel refreshed and peaceful in your home. Instead of picking at all the things you don’t like, you can look around and be satisfied by how much better your home looks with a few simple changes.
Outdoor Additions
Beyond the garden, you can do a lot in your outdoor space to make it more functional. If you like spending time outdoors, consider adding elements to your garden that will make it easier to spend time in. A new patio, porch, or deck on your house gives you a great indoor-outdoor space. You can also make a screened-in deck to enjoy your space at any time, regardless of bugs or wildlife.
A gazebo, shed, barn, or other garden fixture can also make for a great upgrade to your space, as long as you have a reason for it. Make sure you’re investing your reverse mortgage money into something you’ll get good use out of.
Conclusion
While a reverse mortgage may not be for everyone, it’s a useful tool to help you access cash for a renovation project. If you’re struggling with how to afford the renovations you want to do, check to see if you can benefit from a reverse mortgage or a similar loan type.