Loan Options after Retirement Home Equity Home Equity Loans Reverse Mortgages

What options are available for seniors needing additional funds?  Senior citizens have unique challenges when faced with unexpected expenses.  Three types of loans are discussed as options for senior homeowners.

Senior citizens face a unique challenge – how do you live on a fixed income when costs are rising and the income isn’t?  If you are consistently falling short on living expenses, then alternatives need to be considered.  But if you are faced with an unexpected expense that requires a cash outlay, there are options available to senior citizens that own a home.  These options include the following:

Home Equity Loans

A home equity loan allows you to take advantage of the equity in your home by taking out a loan against that equity.  Rates and costs are often lower than that of a typical credit card or loan.  Should the money be needed for home repairs, the interest may be tax deductible, making this solution even more attractive.  But it’s important to remember that you are putting up your home as collateral. Collateral is a term used to describe an asset that is offered to secure a loan or other credit. It is subject to seizure should the loan be defaulted.

Home Equity Lines of Credit

A home equity line of credit is a form of revolving credit which can be drawn on an as-needed basis. Because a home often is a consumer’s most valuable asset, many homeowners use home equity credit lines and home equity loans only for major items, such as education, home improvements, or medical bills, and choose not to use them for day-to-day expenses.  Again, the home is used as collateral for this line of credit.

Reverse Mortgages

Another solution to obtaining credit that has become popular in recent years is a reverse mortgage.  A reverse mortgage is available for those 62 and over that own their own home. This type of loan allows you to convert a portion of the equity in your home into cash.  The fees and rates for these loans are typically much higher than with home equity loans

Unlike a traditional home equity loan or second mortgage, no repayment is made until the borrower no longer uses the home as their primary residence.  At this time, the borrower or their estate will repay the cash received from the reverse mortgage plus interest and other fees, to the lender. The remaining equity in the home, if any, belongs to the borrower or their heirs.

Seniors face special circumstances with credit, income and debt repayment.  Acquiring too much debt on a fixed income is a rising problem with the senior population, so it’s best to investigate all solutions available when faced with the need to take on any new payment.