Are There Age Requirements for Getting a Home Equity Loan or Line of Credit?

No, but there are things that older people should consider before assuming debt

A question that’s often asked is whether there are age requirements for home equity loans or home equity lines of credit (HELOCS). These products are structured like regular mortgages, with repayment schedules that can span three decades. Taking on a 30-year loan when you’re young shouldn’t be an issue. However, once you reach your 60s, the odds of living long enough to see out that time frame sadly become much slimmer.

Key Takeaways

  • It is illegal for lenders to discriminate and deny credit based on age.
  • Older applicants are treated the same as younger ones: They need a reasonable amount of home equity and must prove that they can afford the monthly payments.
  • Just because you can borrow money doesn’t mean you should. 
  • A loan will give you a nice cash injection, but could hamper day-to-day finances over the long term.
  • If you die before your debt is extinguished, it will—unless you have credit or life insurance—become the responsibility of your heirs.

Older Homeowners Have Lots of Home Equity To Tap

One of the perks of homeownership is the ability to extract the home equity you’ve accumulated in the form of a competitively priced loan or line of credit. That option can be particularly appealing to older people, who are more likely to have already paid off their mortgage or be closer to doing so. They generally also have fewer possibilities to generate extra earnings on top of what they get from Social Security and any retirement accounts, which, in some cases, may not be sufficient to cover an unexpected emergency or a one-off big expense.

Homeowners aged 62 and older were reportedly sitting on a record $10.6 trillion in home equity wealth at the end of the fourth quarter of 2021. According to research from the Urban Institute, they are increasingly open to the idea of tapping into this resource to meet their living needs.

$10.6 Trillion

The amount homeowners aged 62 and above collectively own in home equity wealth.

How Old Is Too Old?

If you’re one of the many people out there concerned about being too old to get a home equity loan or HELOC, you can push aside those worries. It is illegal in the U.S. to discriminate and deny credit based on race, religion, origin, sex, marital status, or age. Thanks to the Equal Credit Opportunity Act (ECOA), a federal civil rights law introduced in 1974, lenders cannot use age as a reason to turn down your request for a home equity loan or HELOC. In other words, it’s theoretically possible for even a 100-year-old to get approved for a 30-year mortgage.

That doesn’t mean that older homeowners are guaranteed to be greeted with open arms by creditors. Like anyone else, they’ll need to prove that they are sensible with money, financially secure, and can afford the monthly payments.

If your retirement savings plan pays out a decent fixed monthly income, you may get a pass. However, if it isn’t up to scratch and barely covers your living costs, you may not have a good chance of securing one of these loans.

Income isn’t the only thing that lenders scrutinize. They also demand that you have quite a bit of home equity, a healthy credit score, and a track record of honoring debt obligations.

The Risks of Home Equity Loans and HELOCs at an Older Age

Just because you can borrow money doesn’t mean you should. Yes, age won’t impact whether a lender accepts your application or not. However, that doesn’t mean being older isn’t important.

Think carefully about whether you want to take on debt in this phase of your life. When people retire, their earning power often deteriorates. Gone are the days of working full time, when bonuses, pay raises, overtime, promotions, and jobs on the side were a possibility. Now you have a set amount to live on and fewer prospects to make that figure grow if needed.

While a home equity loan may offer fixed rates, taking out a line of credit with variable interest rates could be especially risky for somebody in this situation. If inflation spikes, that little extra wiggle room you had for emergencies or extras might disappear.

If you are unable to repay a home equity debt, the lender can sell the house you used as collateral to collect what it’s owed.

We’re not just talking about a few years here. These loans are long-term commitments that could well outlive you. The average American has a life expectancy in 2022 of 79.05 years, yet they can theoretically borrow money at that same age and agree to pay it back over 30 years.

If you die before settling the debt and your heirs are unable to fulfill your obligation, your home is at risk to go into foreclosure. That’s not a nice gift to leave your loved ones.

One way around this—if you can afford the premium and aren’t deemed too risky—is to take out a life or credit insurance policy. With life insurance, a predetermined death benefit is paid out when the policyholder dies, which can be used to cover any expenses you leave behind. Credit insurance, on the other hand, specifically pays off existing debts in the event of death or disability.

What Is the Difference Between a Home Equity Loan and a HELOC?

The differences between a home equity loan and a HELOC are substantial. With a home equity loan, the borrower receives the proceeds in a lump-sum payment and is usually charged a fixed interest rate. Conversely, a HELOC enables the homeowner to borrow money gradually as they need it, up to a predetermined limit, and is normally accompanied by a variable interest rate.

What Credit Score Is Needed for a HELOC?

That depends on various factors, including the value of your home, how much equity you have in it, the amount you wish to borrow, and your debt-to-income (DTI) ratio. Generally speaking, you may find it hard to be approved for a competitive loan if you have a credit score below 700.

Can You Pay Off a Home Equity Loan Early?

Yes, although some lenders may discourage you from doing this by levying hefty prepayment penalties.

The Bottom Line

Age isn’t necessarily going to stop you from being approved for a home equity loan or a HELOC. However, that doesn’t mean being older is irrelevant.

Once you reach a certain age, your earning power declines, and the probability of dying increases. Fail to take those risks seriously and you could be stripped of your home and forced to leave your heirs a significantly smaller inheritance.

Article Sources

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  1. Urban Institute. "More Older Americans Are Drawing Wealth From Their Home Equity, but Racial Gaps Persist."

  2. National Reverse Mortgage Lenders Association. "Senior Home Equity Exceeds Record $10.6 Trillion."

  3. The United States Department of Justice. "The Equal Credit Opportunity Act.”

  4. National Credit Union Administration. "Loan Maturity Limits."

  5. Federal Trade Commission. “Home Equity Loans and Home Equity Lines of Credit.”

  6. Consumer Financial Protection Bureau. "What is the Difference Between a Home Equity Loan and a Home Equity Line of Credit?"

  7. Macrotrends. “U.S. Life Expectancy 1950-2022.”

  8. Harrison Estate Law. "What Happens When You Inherit a House with a Mortgage?"

  9. Experian. "What Credit Score Do I Need to Get a Home Equity Loan?"

  10. Consumer Financial Protection Bureau. "What is a Prepayment Penalty?"