Whether you’re interested in pursuing the option or not, you’ve likely heard of reverse mortgages. You can’t watch television, read a newspaper or walk through most cities without seeing advertisements for them.

There’s a new concept taking flight in real estate that has the potential to seriously overshadow reverse mortgages. Residential sale leaseback may give people the same option to continue living in their home with most of the same financial benefits of selling, but with far fewer restrictions and more favorable terms. Both may be sound options, but it’s important to weigh the pros and cons of a reverse mortgage and residential sale leaseback before deciding which is right for you.

Reverse Mortgage: Pros And Cons

Reverse mortgages essentially allow older people (reverse mortgages are generally only available to people 62 or older) to obtain a loan on the equity of their home while still living in it. Most companies only offer reverse mortgages for homes that are worth more than $100,000 with more than 50% of the mortgage balance in equity.

Rather than making a mortgage payment, reverse mortgages allow homeowners to draw cash out of their home equity in a lump sum, monthly payments or a line of credit. Those who obtain a reverse mortgage continue living in their home. The loan is repaid through the sale of the home or when the homeowner passes away, with any remaining equity in the home reverting to the owner or their next of kin in the event of their death.

A reverse mortgage has the potential to help older people out of a potential foreclosure, obtain money for retirement and still own their home and pass it on to their next of kin.

However, the terms of these loans may become less appealing due to changes in government regulation of these loan products. The regulations, which are being changed to save taxpayer money, will lower the amount reverse mortgage users may borrow by more than 5% and increase the amount paid for the privilege of using the reverse mortgage product. For more information on reverse mortgage regulations, take a look here.

With the above in mind, reverse mortgages are ideal for retirement-aged people who need to fill the gaps in their retirement funds, who don’t need a full liquidation of their assets to balance the budget in retirement. It will allow them to get some cash in hand with the assurance that their heir will receive the property after they pass