Traditional lenders who facilitate home loans for seniors, also known as home equity loans have a lending criteria mostly based on the appraised value of your home. A senior's credit score, or sources of income does not weigh heavily in the application. The significance of this is that you may not need to qualify like you would a traditional bank mortgage
When taking out a home equity loan the borrower will receive the funds in a lump sum. The borrow would then be required to make monthly payments on the advance until the loan is repaid. Rates for a home equity loan are generally a little bit higher than standard prime mortgage rates.
Home equity loans are appropriate to borrowers who can afford monthly payments and require a larger advance than what a reverse mortgage can provide. Equity lenders do not generally lend beyond 60% of the appraised value of your home.
Advantages of home equity loans
- lending criteria is not based on credit score and income, rather based on the value of the home
- You can borrow larger amounts, generally up to 60% of the home's appraised value.
Disadvantages of home equity loans
- Probably slightly higher rates than prime mortgage rates
- Must make monthly payments
- Advances are made as a lump sum