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Using a home equity loan to modify the house to stay in place

Most people want independence, and that independence is essential to their quality of life, with 77% of adults aged 50 and over saying they would like to stay in their home and community for as long as possible. Making changes to your home to reduce the risk of falls and make it easier to navigate your home as you age can help you age in place in the home you love. While some modifications, like installing grab bars in your shower, can be done relatively inexpensively, modifying your historic Victorian to be wheelchair accessible can cost tens of thousands of dollars. . If you don’t have any money, should you use the equity in your home to modify it so you can stay in it longer?

Key points to remember

  • A home equity loan can help you access cash to stay in your home longer.
  • Many modifications can be made inexpensively.
  • If you need expensive modifications, grants may be available.
  • You may be able to stay independent longer if you sell your home and move into a more accessible home.

How a home equity loan works

A home equity loan allows you to borrow against the equity in your home to receive a lump sum payment which you then repay over a set period of time at a fixed interest rate with fixed monthly payments. Because a home equity loan uses the equity in your home as collateral, you can access cash at a much lower interest rate than unsecured alternatives like credit cards or a personal loan.

Before you take out a home equity loan, it’s a good idea to get a modification cost estimate so you can borrow the amount you need and don’t be tempted to spend the rest of your loan proceeds on the slight.

Home equity loan alternatives to modify your home

Many modifications for aging in place can be done inexpensively. The Cleveland Clinic has a list of dozens that can all be done for less than $50. For example, simply removing mats can reduce your risk of falling and is free. Reducing your risk of falling by eliminating tripping hazards can help you avoid injuries that could land you in a care facility permanently.

If you find you need more expensive modifications, such as a wheelchair ramp, widened doorways, or a completely modified kitchen or bathroom, there are still options available without taking out a home equity loan.

The US Department of Housing and Urban Development (HUD) has a comprehensive grant program called the Senior Citizens Home Modification Program (OAHMP). With this program, HUD offers grants to local organizations that work directly with seniors. To see what grants and supports are available in your area, call 211.

If you’re still working, budgeting and saving to make changes to your home is a great alternative to taking out a loan.

If you care more about staying in your community and maintaining your independence for as long as possible than staying in your current home, selling it might be a better option. Some homes, especially older ones, are just too expensive to modify to the level that will work best for you in your eighties. Selling your home and buying one that is specially designed for future mobility issues can help you maintain your independence longer than staying in a house with narrow doorways and four stories that are impossible to make wheelchair accessible.

How do I get approved for a home equity loan?

To get approved for a home equity loan, you’ll need everything you would need for a standard loan: decent credit, a low debt-to-equity ratio, and a proven income high enough to repay the loan. You’ll also need a minimum of 10% equity in your home, although most lenders require 15% or more.

Is a Home Equity Loan or Reverse Mortgage Better for Renovating?

Deciding between a home equity loan or a reverse mortgage is quite easy. If you can get approved for a home equity loan and have the funds to pay it off, you will still own your home, allowing you to pass it on to your heirs while also having the option of taking out a reverse mortgage. later. Reverse mortgages typically have much higher fees, which means you get less real money for the same amount of hard-earned equity you’ve built into your home than you would get from an equity loan. home.

What are the risks of a home loan?

If you take out a home equity loan before you retire, be sure to estimate your retirement income and make sure you’ll be able to repay the loan, or be sure to repay the loan before you take your retirement. If you don’t repay the loan, it will be in default and you could lose your home. Another risk is that you could go underwater on your loans and become unable to sell your home without financial loss if you have to move.

The essential

Aging happens to everyone. Consider the quality of life you want for your golden years and make changes now to ensure you can live the way you want for as long as possible. Making age-in-place modifications doesn’t have to be expensive, but if your home has features that need major renovations, a home equity loan is one way to fund those changes. Make sure you will be able to repay the loan before taking one out and check what grants are available in your area.