Many baby boomers and empty nesters prefer the idea of “aging in place” versus selling and find this phase in life to be the perfect opportunity to fulfill their home improvement goals. From installing a pool to turning the basement into a man cave, homeowners planning to turn their home into the ultimate retirement retreat can take advantage of the equity they’ve earned through a variety of financing options.
Reverse Mortgage – One route many take to fund a major renovation or buy the living room collection of their dreams, is applying for a Home Equity Conversion Mortgage aka., HECM. In this scenario, a buyer can either replace their existing mortgage loan, or tap into their home’s equity without making a mortgage payment until the home is sold, or the last homeowner has passed on. A HECM loan is an attractive option for borrowers who have paid down their traditional mortgages, and have a healthy amount of equity because it allows them the option of receiving a tax-free disbursement to use however they desire.
Refinance – This is a great option to take advantage of lower interest rates, and possibly reduce monthly payments. Owners who have been in their home a few years may want to look into refinancing to lock in interest if they’re currently in an adjustable-rate situation and assess how much equity they have in their home. Whether they plan on using it to pay off debt, cash it out for a dream vacation, or make a major purchase, eligible applicants could potentially add even more value to their home by using the equity proceeds to make improvements.
HELOC or Loan? – Home equity lines of credit are based on taking out-earned equity in the form of a credit line and making regular monthly payments. A Home Equity Loan is the same idea, but unlike a HELOC, a loan offers the security of a fixed interest rate, and predictable payment. With a credit line, rates, and payments may fluctuate depending on the current financial climate. Borrowers who take out a loan can take out what they need for whatever they intend to use it for, with the intent to pay it back, using their home as collateral.
Homeowners can utilize their earned equity as a way to enhance their personal sanctuary and should consult with a reputable lender to determine if these options are right for them. With some careful planning, building dreams can be made an affordable reality.
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