A longtime dream of yours has been treating your entire extended family (some forty people with all the in-laws, cousins, and kids) to a week-long getaway reunion in the mountains. You want to do this before the youngest of the grandkids starts college next year. Rather than shaking up your IRA accounts, depleting savings with a big withdrawal, or reducing the monthly income you use for your own lifestyle needs, the two of you have come to the decision to borrow against your home, repaying that loan over several years. Obviously, the high interest rate climate is of concern, but if you’re going to realize the dream, you’ve concluded, it has to be while you are in good health and whole the grandkids will see this as an adventure, not an annoyance.
In using the equity in your home to finance the “dream getaway”, consider tapping your housing wealth using a reverse rather than a “forward mortgage”. While interest rates are indeed higher now than in recent years, home values have risen as well, no doubt increasing your equity in the home. With reverse mortgage financing, there will be no obligation to make monthly mortgage payments*; the loan will not “come due” until you either sell the home and move, or until the second of you has passed. What’s more, whatever portion of your equity is not needed now will be credited with growth at the same rate as the interest being charged on the outstanding loan balance. Should other needs arise in future, there will be a cash “reservoir” that can be tapped.
As you’ve already realized, the timing needs to be right to accommodate the schedules of the college-bound young ‘uns. The flexibility of a reverse mortgage will allow the two of you to realize the dream sooner – and pay for it either sooner or later.
*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.