3 Home Equity Options Seniors Should Know

As we age, our financial needs change and so do our options for accessing potential sources of income. Many seniors find themselves in need of additional funds to cover rising health care costs and other expenses. A financial option for older homeowners is to tap into them Home is equal.

Home equity refers to the portion of your home’s value that you own outright — in other words, your mortgage balance minus any payments you’ve made. You have more equity, The more you can borrowOften the rate is considerably lower than you would get with such financing options Credit card And personal loan.

There are several ways seniors can access their home equity, one of which is not available to small home owners. To find the best option for you, it’s important to understand how each works and the benefits and risks that come with them.

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3 Home Equity Options for Seniors

Can be used for all options below Any objective of your choiceIncluding medical expenses, home improvements or providing an additional source of retirement income.

Home equity loan

A Home equity loan Gives you a lump sum of cash, which you pay back with interest. These loans usually have fixed interest rates and monthly payments. They can be useful if you need a significant amount of money at once, such as to pay a large medical bill or major home repairs.

Come with home equity loans Closing costs, which should be taken into account when deciding how much to borrow. And most importantly, these loans are secured by your property, which means if you can’t keep up with the payments, you could lose your home. So make sure you can afford the payments comfortably over the years before taking a home equity loan.

Check out the top home equity rates now to see how much you can borrow.

Home Equity Line of Credit (HELOC)

A Home Equity Line of Credit (HELOC) A revolving line of credit that works like a credit card. You can borrow from this line as per requirement and you will pay back the amount you borrow. HELOCs have variable interest rates and can change over time, making payments less predictable than home equity loans.

That said, because you only borrow what you need, you can pay substantially less than a single amount on a home equity loan. The borrowing flexibility HELOCs offer makes them ideal for ongoing expenses such as covering gaps in your budget as they arise.

Like home equity loans, HELOCs are secured by your home, so don’t borrow more than you know you can repay. You have to pay for that too Closing costsEither out of pocket or rolled into your total loan repayment costs.

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reverse mortgage

One of the most popular ways for seniors to tap into their home equity Reverse mortgage. Reverse mortgages are only available to homeowners age 62 and older. Unlike other home equity options, reverse mortgages essentially “pay” you instead of the other way around.

You can receive income from a reverse mortgage as a lump sum, line of credit or monthly payment, and as long as you live in the home, you don’t have to pay the lender back. This can help provide some much-needed breathing room in your budget at a time when your income may be more limited than in the past. However, if you still owe money on your original mortgage when you take out a reverse mortgage, you’ll need to use some of the proceeds to pay off your remaining balance.

Remember that, like the other options above, your home serves as collateral for a reverse mortgage. Even if you have no monthly payments, you need to stay current on your property taxes and home insurance or you risk foreclosure.

Find the best home equity product for you — review your options here!

Bottom line

Ideally, you will have enough money in retirement to cover the expenses that arise. But it’s not always possible to save as much as you’d like, and sometimes, unexpected expenses crop up that can throw off even the best plans. In this case, borrowing from the equity you’ve built up in your home over the years can be a cost-effective source of money so you can better enjoy your retirement years.