The home that the borrower in question owns serves as collateral for home equity loans. If you have equity, which is the amount owed on your mortgage less the property’s current market value, you can borrow that amount and pay it back over time. This is helpful if you want to travel, make home improvements, or do anything else.
You might be wondering if you can get a home equity loan if you’re retired. The good news is, you absolutely can! Let’s look at how and why. By clicking here, you can find out more about our senior financial options.
Here’s a quick example. Consider that your home is worth about $750,000 and that you still owe $200,000 on your mortgage. Therefore, the maximum amount of equity you could convert into a loan would be $550,000, although lenders typically won’t lend you more than 65 to 75 percent of the home’s value.
Equity will continue to rise as you pay off your loan as your house increases in value. Payments are made monthly. While the interest rate for a home equity loan is typically lower than that of a credit card, it is typically higher than that of a prime/conventional mortgage. If you need help choosing, be sure to contact one of our knowledgeable mortgage specialists. Remember that the lender will require an appraisal of your home, and that the value determined by the lender and the one determined by you may differ.
Benefits of a Home Equity Loan
If you want to apply for a traditional home equity loan, you don’t have to worry as much about your income, work history, or credit score because the loan will be based on the value and mortgage amount of your home. As a result, you probably won’t have to worry about meeting specific requirements as you would with other types of financing from your bank. A home equity loan might be a viable option for you if you don’t have enough income to pass the federal government’s stress test, whether it comes from pensions, retirement savings plans, or some other source. This is especially true if you require a larger lump sum of money than a reverse mortgage could provide.
What You Need to Know About Non-Qualifying Loans
Of course, while your income is more crucial in obtaining a home equity loan than your credit score, both are equally crucial in determining the interest rate you’ll pay. If you want to get the best rates possible, keep this in mind. As we previously mentioned, the interest rate will be higher than that of a prime mortgage, but if your credit score is low or your income is below the required level, it will rise even more. Alternatively known as a non-qualifying equity loan, this could also incur additional fees from some lenders. The lender will assess the file’s price based on internal risk metrics, and the interest rate will be influenced by the credit score.
Overall, yes, a retiree can obtain a home equity loan. It’s a great option if you require a sizeable lump sum of money and feel at ease using your home as collateral. However, based on your specific situation, it might or might not be the best choice for you. Instead, you might be interested in a CHIP reverse mortgage, another one of our areas of expertise. Click here to learn more about this option.
Our staff at the Seniors’ Lending Centre is happy to assist you in making an informed choice about your finances and the senior options available. To speak with our financial experts about your needs, click here to contact us right away. Alternatively, you can click here to complete our no-obligation quote form.
FAQ
Can retirees get a home equity loan?
Retirees can apply for secured loans, such as mortgages, home equity and cash-out loans, reverse mortgages, and auto loans, which all require collateral.
Can I get a home equity loan if im on Social Security?
However, if you have additional sources of income, you might be able to get a home equity loan. Lenders may take into account the following non-employment income sources: pension or retirement Social Security.
Can an 80 year old get a home equity loan?
Lenders are not permitted to use age as a basis for discrimination when denying credit. Older applicants are given the same consideration as younger ones: They must have a respectable amount of home equity and demonstrate their ability to make the required monthly payments. It doesn’t necessarily make sense to borrow money just because you can.
What disqualifies you from getting a home equity loan?
Poor credit score. Insufficient home equity. Unstable employment or income history. Poor debt-to-income ratio.