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Is a reverse mortgage or home equity loan better for seniors? Experts weigh in
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Record-high inflation in the post-pandemic era has been challenging for many Americans, but retirees often face added struggles as prices rise since many are on a fixed income. That’s why it comes as no surprise that 59% of retirees expressed concerns about their financial security, according to a survey conducted by MedicareFAQ.
The good news is that many seniors have a significant source of funds to draw from in their home equity. In fact, for seniors 65 and over, the median value of their home equity is $250,000. That’s a 47% increase in the value of equity since before the pandemic.
Older Americans who need extra funds can tap this equity to help make ends meet, and they have different ways to do it including a home equity loan and a reverse mortgage. There are important differences between home equity loans vs. reverse mortgages, though, so retirees must do more than just compare today’s home equity interest rates to decide which is best.
This guide will help you understand when a reverse mortgage makes sense and when you should opt for a home equity loan instead.
Find out more about your home equity loan options here.
When a reverse mortgage is better for seniors
Reverse mortgages use your home as collateral, just as traditional mortgage loans do — but they work very differently. That’s because you don’t send in monthly payments with a reverse mortgage. Instead, your lender sends money to you and your loan balance grows each month. When you pass away or move, the reverse mortgage must be paid back.
“A reverse mortgage is intended for borrowers over age 62 that are not able to afford their monthly payments using their current retirement income and need additional income to help with their responsibilities,” says Lisa Gaffikin, a home loan specialist at Churchill Mortgage.
Gaffikin says that if you have limited income, you may not qualify for a traditional home equity loan but a reverse mortgage could be an option. You’ll get to stay in your home without adding to your monthly obligations, while also being able to supplement your current income.
You do need to have sufficient equity in your home though, and will need to follow requirements including continuing to maintain the property over time.
“Reverse mortgages are ideal for seniors who are house-rich but cash-poor,” says Josh Lewis, a certified mortgage consultant and host of The Educated Homebuyer.
Lewis also addressed a common concern seniors have about reverse mortgages: the ability to leave property to loved ones when you pass away, which could be impacted by the fact the loan must be paid upon your death.
“There’s a misconception that you won’t have a home to leave to your heirs but that is not true,” Lewis says. “You’ll have a home, but the equity your heirs inherit will depend on how long you live and how your home appreciates over time. It’s truly no different than inheriting a home with a traditional mortgage, except the loan balance will need to be paid off through a refinance or sale within six to 12 months of the homeowner’s passing.”
Learn about how a home equity loan could benefit you today.
When a home equity loan is better for seniors
Home equity loans work differently than reverse mortgages. You’ll still need equity and must use your home as collateral, but you receive the borrowed funds upfront when you take out the loan and you must start making payments on the debt immediately.
“Home equity loans are ideal when you need a lump sum and can handle monthly payments,” Lewis says. “With lower upfront costs and typically lower interest rates, they’re perfect if you want to keep building equity and might sell or pass on your home soon. This option works well for those with a steady income who are looking to borrow for a specific purpose.”
The key thing to remember, though, is that you must qualify by showing the lender you have enough money to afford the loan payments and you must be able to make those payments for the duration of the loan term. This isn’t always easy when you need extra cash.
“A home equity loan might be a better option if the homeowner is not struggling to make current payments and only needs equity from the home to consolidate non-property debts or to lower monthly expenses for liabilities with higher interest rates,” Gaffikin says. “If the borrower is comfortable with their housing expenses and can make the current housing-related payments and the new home equity loan payment, a home equity loan might very well be the best choice.”
Gaffikin recommends looking at your full financial picture and considering the long-term implications of your decision when deciding which is right for you.
The bottom line
Ultimately, if you want to access equity with no monthly payments and are OK with leaving less equity to your heirs, a reverse mortgage is likely the better option and you should shop carefully to find the best reverse mortgage companies to minimize interest and fees. If you’d rather pay back your loan during your lifetime and can afford it, a HELOC is the better choice.
President Biden is in Arizona on Friday to issue a formal presidential apology to Native American communities for the atrocities committed against Indigenous people during a 150-year era of forced federal Indian boarding schools. The president’s remarks are scheduled for 1:30 p.m. EDT.
The president chose to speak at the Gila River Indian Community in Arizona, although his apology is for all tribal communities that suffered. From 1819 through the 1970s, the federal government and religious institutions established boarding schools throughout the country to assimilate Alaska Native, American Indian and Native Hawaiian children into White American culture by forcibly removing them from their families, communities and belief systems. Many children who attended these boarding schools endured emotional and physical abuse, and hundreds of them died.
“I’m heading to do something that should have been done a long time ago,” Mr. Biden told reporters before boarding Marine One on Thursday afternoon. “Make a formal apology to the Indian nations for the way we treated their children for so many years.”
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The Department of the Interior, run by the first Native American Cabinet secretary, Deb Haaland, conducted the first-ever federal investigation into the Indian federal boarding school era. It revealed that more than 500 American Indian, Alaska Native and Native Hawaiian children’s deaths occurred at 19 of the federal Indian boarding schools, and identified 53 marked and unmarked burial sites at school sites nationwide. The federal government often contracted with Presbyterian, Catholic and Episcopalian religious institutions to run the schools.
The report found that when children failed to meet standards or broke rules, they were subjected to corporal punishment, including “solitary confinement; flogging; withholding food; whipping; slapping; and cuffing.” Oftentimes, older children were forced to inflict punishment on their younger classmates.
Speaking with reporters aboard Air Force One en route to Arizona on Thursday, Haaland’s voice broke.
“For more than a century, tens of thousands of Indigenous children, as young as 4 years old, were taken from their families and communities and forced into boarding schools run by the U.S. government and religious institutions,” Haaland said. “This includes my own family. For decades, this terrible chapter was hidden from our history books. But now, our administration’s work will ensure that no one will ever forget.”
How to watch President Biden’s remarks at the Gila River Indian Community
- What: President Biden delivers an apology on behalf of the country for atrocities at federal Indian boarding schools.
- Date: Friday, Oct. 25, 2024
- Time: 1:30 p.m. EDT
- Location: Gila River Indian Community in Arizona
- Online stream: Live on CBS News in the player above and on your mobile or streaming device.
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If you’ve paid any attention to the precious metals market recently, you’re likely aware that gold has been on an impressive upward trajectory since the start of the year. On January 1, gold was trading at $2,063.73 per ounce. Fast forward to today (October 25, 2024), and the price of gold is sitting at $2,734.46 per ounce. This represents an increase of $670.73 per ounce, amounting to a growth rate of approximately 33% in a little over 10 months. This significant growth has captured the attention of investors and market analysts worldwide, as gold’s performance defies predictions and underscores its historic role as a stable store of value.
The recent rally becomes even more noteworthy when compared to gold’s prior record highs. Just this August, the price reached $2,525 per ounce — a milestone that marked a new peak at the time. However, gold’s price was far from plateauing at that point. The price of gold continued to surge, eventually surpassing that mark by over $200 per ounce. This upward movement has established the past year as a standout year for gold, drawing investors who may have initially seen these peaks as ceiling prices, but who now view gold’s price potential as far more expansive than anticipated.
But while there’s no question that gold has offered some of the biggest returns over the past year, many investors are questioning what, precisely, is driving this sustained surge. So why is the price of gold so high right now? That’s what we’ll break down below.
Add gold to your investment portfolio today.
Why is the price of gold so high right now?
Here are a few of the factors that have been pushing gold’s price to new heights over the last year.
Central banks are buying in
A primary force behind gold’s recent bull run is the purchasing activity of central banks worldwide. Central banks, particularly those in emerging economies, are increasing their gold reserves as a hedge against economic uncertainty and to diversify their holdings away from traditional fiat currencies. This sustained buying pressure from such powerful market participants has created a strong foundation for price appreciation and signals a broader shift in institutional attitudes toward gold as a strategic asset.
Investors are capitalizing on short-term gains
In addition to central banks, individual investors have been flocking to gold, seeing an opportunity for both short-term and long-term gains. With gold prices rising so quickly, gold has become an attractive asset for speculative trading as well as a safer, longer-term investment. So, some investors are now seeking quick returns by betting on the momentum of gold’s climb to earn rapid profits, while others continue to rely on gold’s stability.
The rush of buying and trading activity creates a feedback loop, further driving demand and prices up. This blend of trading activity has been a core factor in the consistent upward price movement over the past year, illustrating gold’s dual role as both a stable store of value and a source of near-term market excitement.
Find out more about your gold investing options here.
More investors are diversifying
Ongoing geopolitical tensions, including election year uncertainties, are also playing into gold’s price surge. Elections can influence market sentiment by adding uncertainty, often triggering interest in safe-haven assets like gold. Additionally, global economic slowdowns and international conflicts, such as those involving energy trade disputes, have introduced more volatility in the global market, leading investors to seek refuge in gold.
With each spike in uncertainty, gold’s appeal as a safe, non-correlated asset increases, attracting investors looking to hedge against potential market downturns. For many, gold remains a reliable safeguard, reinforcing its role as a cornerstone in diversified portfolios, especially during periods of unpredictability.
The limited supply also plays a role
The limited supply of gold has also contributed to its recent price surge. Gold is a finite resource, after all, and mining new gold is both costly and time-intensive. As demand grows from both investors and industrial sectors, the pressure on gold’s limited supply intensifies, elevating its value.
Technological advancements in sectors like electronics and green energy have also increased gold’s utility. Gold is used in electronic components, medical devices and emerging green technologies, creating steady industrial demand. This expanding industrial application is a lesser-known but increasingly important factor, reinforcing gold’s value beyond traditional uses.
The bottom line
The remarkable ascent of gold prices in 2024 can be attributed to a perfect storm of global economic and political factors. Central banks’ substantial purchases, investors’ pursuit of both security and short-term gains, geopolitical uncertainties and the finite nature of gold itself have converged to create a robust and sustained rally.
Looking ahead, many analysts believe that gold’s trajectory may continue upward, especially if central banks and industrial sectors sustain their interest and if global uncertainties persist. While the current price surge may eventually stabilize, investors and analysts alike are continuing to keep a close eye on this precious metal right now, as gold continues to set new records and play a vital role in today’s dynamic economic landscape.
At 56, Kim Hale is reigniting her passion for dance, sharing her journey on social media and embracing the motto, “Dreams have no deadlines,” as she pursues a role on Broadway.
Hale, who has over 13 million likes on TikTok, said she has always loved the stage and the energy that New York City brings,
“It just feels like a city where you can dream big,” said Hale.
Hale’s dream of performing on Broadway began in her early years, driven by her passion for expressing herself through movement. She pursued that ambition into her 20s and 30s, but eventually left New York, finding the constant rejection difficult to handle. Reflecting on that time, she acknowledges that she was more vulnerable then. Relocating to California, Hale remained connected to dance, teaching and working for renowned dancer and actor Debbie Allen.
“The biggest gift I got was working for Debbie Allen, and being able to be in her world, which taught me that you can take the skills of dance and apply them to anything,” said Hale.
Hale was around dance, but she wasn’t dancing, and it turns out, that is what her heart still wanted.
“It took COVID. It took the loss of both of my parents. It took skin cancer to get me to step back into a dance studio,” said Hale.
With encouragement from a friend, Hale enrolled in a hip-hop class and “ended up loving it,” saying that each class helped her reconnect with herself.
Hale began sharing her journey on social media, where her posts took off. Broadway choreographer Jerry Mitchell commented on one of her videos, telling her, “Dreams have no deadlines.” It’s a mantra she holds close.
“I just held onto that,” she said.
In May, Hale got to perform in a special showing of “Chicago,” though she doesn’t see it as her official Broadway debut.
“I want to audition and book a show because I prepared for it. I was ready when opportunity met preparation, and I got it,” she said.
For Hale, her return to New York and pursuit of a Broadway role is about more than just achieving a dream.
“The goal is to see what I’m capable of,” she said. “You have to do the work. You have to be ready. But I believe that if it’s meant for me, it will happen. And if it’s not, maybe there’s something bigger out there.”
