Once you decide it makes sense for you to continue living at home, you need to make sure you have adequate funds. There are short term and long term options available, depending on your situation.
You will need to ask yourself:
- Why do I need the money?
- How much cash can I get from my house for the help I need?
- Am I prepared to tap into my home equity?
The equity you have built up over the years should be used wisely. it is important to understand the details of your options.
You also need to ask yourself if your financial needs are short term, or long term.
Short term solutions for immediate needs:
Home repair and improvement loans-Borrowers get a one-time, lump-sum payment that can only be used for the specific repairs the program allows
Property tax deferral loans- these programs allow homeowners to defer their tax payments until they sell the house,
Advantages:
- Typically less expensive than conventional home loans
- Some programs forgive all or part of the loan if the borrower continues to live in the home for a certain period of time
Disadvantages:
- Eligibility is often limited to low income homeowners
- These loans may not be available where you live
- Remaining home equity may not be able to be tapped for other needs.
Conventional Home Equity Loans: These loans can be useful for homeowners who are unsure how long they wish to remain in their homes, or how much help they will need.
- Home equity line of credit- works like a credit card. can borrow up to a certain limit for the life of the loan. You can use the money as needed. As you pay off the principal, the credit is restored and you can use it again.
- Home Equity Loan- Borrowers receive a lump sum. The loan is paid off over a set amount of time, in installments calculated by the lender.
Advantages:
- If you qualify you can obtain a home equity loan
- With a line of credit, you pay interest only on what you borrow
- Since you pay for the loan from your income, your home equity does not decrease
Disadvantages:
- You may not qualify for these types of loans. lenders look carefully at income, other debt and credit history
- Borrowers must be able to make monthly payments on the home equity loan. If payments are not made, you run the risk of losing your home.
Long term solution- ReverseMortgage:
Homeowners who expect to remain in their current homes should consider a reverse mortgage. Borrowers can select to receive payments as a lump sum, line of credit , fixed monthly payment for life, or a combination of payment options. The money borrowers can receive is tax free, and can be used for any purpose.
Advantages:
- You continue to own your own home, and can never be forced to leave as long as you maintain property and keep taxes and home insurance current
- You or your heirs will never owe more than the value of your home at the time you sell or repay the loan, even if the home value declines
- Maintain independence, while remaining in home
- Increase monthly cash flow with the elimination of existing mortgage
Disadvantages:
- Closing costs can be expensive, but can be financed into the loan
- Borrowers may use up a portion of home equity over time
