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Table of Contents

Using a Home Equity Loan to Make Modifications to Age in Place

Most people desire independence, and that independence is essential to their quality of life, with 77% of adults ages 50 and older responding to an AARP survey that they would like to remain in their homes and communities for as long as possible.

Making modifications to your home to reduce fall risks and make it easier for you to navigate your home as you age can help you age in place in the home that you love. While some modifications, such as installing grab rails in your shower, can be done relatively cheaply, modifying your historic Victorian to be wheelchair accessible can cost in the tens of thousands. If you don’t have the cash, should you use the equity you have in your home to modify it so that you can stay there longer?

Key Takeaways

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

How a Home Equity Loan Works

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

Before taking out a home equity loan, it’s a good idea to get estimates on modification costs so that you borrow the amount you need and aren’t tempted to spend the rest of your loan proceeds frivolously.

Home Equity Loan Alternatives to Modify Your Home

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

If you find that you need more costly 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 U.S. Department of Housing and Urban Development (HUD) has an entire grant program called the Older Adult Homes Modification Program (OAHMP). With this program, HUD provides grants to local organizations that work directly with seniors. To see what grants and assistance are available in your area, call 211.

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

If you care more about staying in your community and retaining independence for as long as possible than about remaining in your current home, then selling it might be a better option. Some homes, especially older ones, are simply too cost prohibitive to modify to the level that will be best for you in your 80s. Selling your home and buying one specifically built for future mobility issues may help you retain independence for longer than staying in a home with narrow doorways and four floors that would be 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 all of the things that you would need for a standard loan: decent credit, a low debt-to-income (DTI) ratio, and proven income high enough to pay back the loan. You’ll also need a minimum of 10% equity in your home, although most lenders will require 15% or more.

Is a home equity loan or a reverse mortgage better for remodeling?

Deciding between a home equity loan and a reverse mortgage is quite easy. If you can get approved for a home equity loan and will have the funds to pay it back, then you will retain ownership of your home, allowing you to pass it down to your heirs and still have the option to take out a reverse mortgage later. Reverse mortgages typically have much higher fees, which means that you get less actual cash for the same amount of hard-earned equity that you built in your home than you would get from a home equity loan.

What are the risks of a home equity loan?

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

The Bottom Line

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

Article Sources
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  1. AARP. “Despite Pandemic, Percentage of Older Adults Who Want to Age in Place Stays Steady.”

  2. Cleveland Clinic, Health Essentials. “Aging in Place Modifications to Help Older Adults.”

  3. U.S. Department of Housing and Urban Development. “Older Adult Homes Modification Program.”

  4. U.S. Bank. “Home Equity Rate and Payment Calculator.”

  5. Discover, Home Loans. “What Loan to Value Ratio Means for Home Equity Loans.”

  6. U.S. Department of Housing and Urban Development. “Home Equity Conversion Mortgages for Seniors.”

  7. Consumer Financial Protection Bureau. “What Is a Home Equity Loan?