While your original plan had been to work through your early seventies, a downsizing three years ago forced you into retirement at age 64. Now, even working various part time gigs, you have been unable to retire your nearly $40,000 in credit card debt. Thankfully, your home is mortgage-free and in good shape, and you have no car payments. You had been putting off this step, but are now considering taking out a mortgage on the house. Although the interest rates you’re being quoted are far higher than they would have been had you done this a couple of years back, you’re being panicked by the dramatic rise in your monthly costs on the cards.
As an alternative to a second mortgage, you might consider a reverse mortgage, using the equity you’ve built up in the home to retire the credit card debt once and for all. Certainly the reverse mortgage is itself a loan, but with no monthly payments* due of either principal or interest, you might experience great relief, allowing you time to stabilize your day to day finances. Meanwhile, whatever available portion of your housing wealth that is not needed for paying off the credit cards will be growing at the same rate as the interest being charged on the reverse mortgage loan.
That reverse mortgage loan, in turn, does not need to be repaid until such time as you sell the home, move, or die. Even then, neither you or your heirs will be liable for any part of the loan that exceeds the value of the home at that time.
Changing the nature of your debt can relieve the pressure caused by rising credit card rates.
*Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.