When deciding on getting a HELOC in Oregon, Washington or Idaho, you must be aware that there are many different kinds of HELOCs available to choose from. Banks, lenders, and mortgage brokers offer various traditional HELOCs that have their own terms and conditions. The kind of HELOC you choose depends on your goals and your lifestyle. HELOC stands for home equity line of credit and is a loan based on the equity in your home. There is often a risk of foreclosure if payments are missed and the available loan amount can fluctuate or be frozen at the bank’s discretion. A HELOC can be a 1st or 2nd mortgage on a home and some can even be on second homes or vacation properties. When deciding if getting a HELOC in Oregon, Washington or Idaho is right for you, it’s important to consider these points:

1. Can you afford any additional monthly mortgage payments?
2. How much cash do you need to accomplish your goals and will a HELOC allow for that?
3. How many years will the HELOC be open for?
4. Are there any balloon payments due?
5. When/If the HELOC becomes due, how are you going to pay it back?
6. Is the rate adjustable or fixed and will your monthly mortgage payments fluctuate?
7. How old will you be when the HELOC expires or closes?
8. How will taking a HELOC affect your ability to pay off your mortgage(s) over time? Will you have to work longer?
9. Are you planning to use the funds from the HELOC to pay some or all of your mortgage payments?
10. Other than the HELOC, do you have any other source of emergency funds or savings?

After considering these questions, the next step is to see what products are available from your favorite local banks, lenders, and mortgage brokers. You should chat with various folks and see who you like the best. Having good communication is key to a good experience when getting a HELOC in Oregon, Washington or Idaho.  Seek referrals from your family, friends, and even people like your insurance agent, real estate agent, attorney, CPA, or financial advisor; they often know people who they have worked with and can give good recommendations for local professionals. Local bankers, lenders, and mortgage brokers often have access to different loan programs, so it’s important to compare what they are offering and how it could affect your goals and lifestyle.

Consider Your Retirement

If you are in or nearing retirement age, it’s very important to seek the guidance of a financial planner before taking any sort of loan out. A financial planner can help you walk through the numbers to see what taking the loan out will look like with your financial picture as you age out of the workforce. Any additional monthly mortgage payments could be detrimental to your current retirement plan. If you are 62 or older, it’s time to consider a HECM instead of a HELOC. The HECM is made specifically for senior homeowners and has guidelines and features in place to enhance your lifestyle in retirement. Compare the HECM with a traditional HELOC below:

 

 

Traditional HELOCs Are Not Made for Today’s Retiree

As you can see, the HECM can allow for a line of credit based on the equity in your home without any mandatory monthly mortgage payments and increased protections for senior homeowners. Traditional HELOCs are not ideal for a retiree’s lifestyle because they don’t give the freedom of choosing where to put your money each month and they don’t provide the peace of mind the HECM offers with the FHA protections and guidelines in place.

Understanding how getting a HELOC in Oregon, Washington or Idaho can affect your financial situation is imperative to your retirement security. If you are in or nearing retirement age, a HELOC may derail or extend your timeline. When people are younger and newer to the workforce, their chances of dying are low while their chances of making more income over time are high. As we get older, these numbers flip; our chances of dying become higher while our chances of an increase in income diminish. These facts of life need to be considered when making financial decisions while in or nearing retirement.

An Alternative to Getting a HELOC in Oregon, Washington or Idaho

For homeowners aged 62+, a great alternative to getting a HELOC in Oregon, Washington or Idahois getting a HECM loan instead. HECM loans are made specifically for people in or nearing retirement. One of the best features of a HECM loan is the line of credit that acts like a HELOC, but there are no monthly mortgage payments ever required and the bank doesn’t control and can’t freeze your available balance! These are FHA loans and are federally insured- the US government put these loans in place for seniors to be able to access their home equity without risking foreclosure due to not being able to make mandatory monthly mortgage payments. The HECM program is one of the safest loans available for seniors and it is a great alternative to getting a HELOC in Oregon, Washington or Idaho for a senior homeowner.

When deciding on your next steps, give us a call and let us hear your plans. As Oregon’s leading reverse mortgage broker, we are very experienced in the many ways these loans can be used as a tool to mitigate risk, build wealth, and elevate lifestyles; educating about using HECM loans in retirement is what makes us tick. Fill out the form below and our loan officer will get back to you during regular business hours.