Sale-Leaseback vs. Reverse Mortgages

Updated May 8, 2023

Continuing to live at home as you get older can become challenging, as expenses may be burdensome, and many people’s wealth remains locked in their home equity. In today’s housing market, many people are comparing the cost of owning a home vs. renting and are also considering selling their homes for the financial benefits. But some may not be ready to leave. If this situation sounds familiar to you, there are a few options to consider that allow you to access your hard-earned equity without leaving the home you love.

The Roles

In a traditional mortgage, the homeowner makes payments to the lender. In a situation such as a reverse mortgage, the lender pays the homeowner.

Reverse Mortgages, a Brief History

Reverse mortgages have been around for decades, and while they might be right for some people, they have a checkered, stigma-laden past. With a relatively short history in the United States, the first reverse mortgage was issued in 1961.

A few decades later, during the 2008-2009 housing market crash, the number of reverse mortgages issued peaked at around 110,000 per year, causing problems for many borrowers. Because of their financial situation, a lot of people couldn’t keep up with the property tax, insurance, and home maintenance.

Sale-Leasebacks, an Alternative

A sale-leaseback is a financial transaction where an owner of an asset sells it and then leases it back from the new owner.

Many people think sale-leasebacks are reverse mortgages, which is understandable but incorrect. While both help people who have large amounts of equity tied up in their home access that equity without selling their home, that’s where the similarities stop. To understand what’s right for you, it’s helpful to understand the nuances of how the two financing aspects differ.

Compare & Contrast

Complex vs. Simple

A reverse mortgage is a complex cash loan for only a fraction of your home’s value, with the remainder held to cover loan interest, mortgage insurance, and fees. Sale-leasebacks consist of two simple transactions: a house sale and a lease agreement.

More Cash vs. Less Cash

A reverse mortgage consists of: 

• 40-60% of your home’s fair market value in cash, depending on a set of complex factors - age, home value and interest rate. 
• ~10% unlocked cash.

A sale-leaseback consists of: 

• Home equity can turn into cash. 
• A 5-6% transaction fee on your purchase price.

Debt vs. No debt

A reverse mortgage is a loan against the value of your house, meaning the borrowed money must be repaid when you leave your home. Since a reverse mortgage is a debt, it weighs on your credit, making it more difficult to get additional credit if needed. Sale-leasebacks are not a debt. The money is all yours, so there is no growing loan interest rate or future lease payments weighing on your credit, which means you have greater financial and lifestyle freedom.

Hassle-Filled vs. Hassle-Free

In a reverse mortgage agreement, you are still responsible for things like home maintenance, taxes and insurance, as you hold the title of your home and are responsible for maintaining it physically and financially. When you take advantage of Truehold’s sale-leaseback option, we take care of all the essential repairs, property tax, and property insurance as part of monthly rent which means you can live easier at home.

A sale-leaseback arrangement might be right for you if you want to capitalize on the wealth you’ve built in your home and maximize your returns, you desire financial and lifestyle flexibility and freedom to live where and how you want, and if you want to keep enjoying your home without worrying about essential repairs.

If you’d like to learn more, give us a call at (314) 353-9757 and one of our representatives can help determine if we’re the best option for you.