Credit Lines

A Home Equity Line of Credit for seniors (heloc) is a revolving line of credit available to a maximum of 65% of the value of your home.  If you already have a first mortgage, a Line Of Credit may be obtained from your existing mortgage provider. Or, a ‘heloc’ can be obtained in first position by itself.

The advantage of a Line Of Credit, for people with limited incomes, is that the minimum monthly payment is usually interest only. A standard interest rate of Prime plus  .50% – .75% applies, however an individual lender’s rates may vary. If you do not require all the funds of a mortgage at once, and just need small amounts of extra credit available to you in times of need, this is a good option for you. The advantage to a senior’s Home Equity Line Of Credit is that by not taking all of the funds at once, you are only paying interest on the money that you have withdrawn rather than the total of your available credit.

The downside is that like most traditional mortgage financing, you must “qualify” based on credit score, job history, income and debt ratios. This can be a challenge for some seniors on limited incomes.  It has become increasingly challenging with implementation of the federal government’s “stress test” for mortgage qualification.

We do have one lender that offers a seniors’ home equity line of credit at only prime plus .70 with slightly relaxed lending guidelines, if the borrower meets certain net worth requirements. The payments are optional, which is a big draw.

Advantages:

• You only pay interest on what you have withdrawn.
• Ideal for those who need smaller sums of money over a longer period of time
• Interest rate is superior to B lenders and non-prime lenders
• You can possibly borrow up to 80% of your equity (but only 65% of it in the actual line of credit)

Disadvantages:

• Qualification based on credit score, income, debts and other obligations
• Requires a monthly payment