Continuing to live in your own home as you age has many benefits. For most people, it means more privacy, comfort, and independence. And it can be less expensive than the cost of a care home. To age safely, you may need to make some physical changes to your home. These can be costly, so it’s best to start planning these improvements early.
How to finance accessible home improvements
As you age, there are a number of additions you can incorporate into your home to improve your quality of life. Some are simple, like installing sensor lights throughout the home or replacing doorknobs with lever handles, while others, like installing a walk-in tub, will require professional help and a larger expense.
Most people reach their peak income between their mid-40s and mid-50s. If you’re in that prime time, your credit score may be at an all-time high and your home’s equity may be at its highest. If that’s the case, home improvement loans and home equity loans are two of your best options if you need help financing your senior renovations.
Senior Housing Renovation Loans
A home improvement loan is a personal loan taken out specifically to finance the renovation of a home.
These loans are typically unsecured and do not require collateral. Approval depends on your credit score, credit history, and income. You don’t have to sacrifice your home’s equity or put your home at risk as collateral. However, interest rates on unsecured loans are generally higher than home equity products.
Some personal loan lenders offer secured loans. For example, Best Egg loans can be secured by home equity. Secured loans can be easier to qualify for or have a lower interest rate if your credit score is fair rather than good or excellent. However, you risk losing your collateral if you default on your loan payments.
Home Equity Loans and HELOCs
A home equity loan or HELOC lets you turn the available equity in your home into cash that you can use to pay for renovations and other expenses. Because these loans are secured by your home, interest rates are often lower than home improvement loans or personal loans.
Home improvement loans typically have repayment terms between one and 10 years, making them a great choice for short-term expenses or small amounts of money that can be paid back quickly. Home equity loans and HELOCs typically have repayment terms between five and 30 years.
Bankrate Tips
If you’re not sure whether you want to continue living in your home after retirement, a home improvement loan may be a good idea.
Are senior home improvement loans right for me?
Your situation will determine which home improvement loan financing option is best for you.
Get multiple quotes, factoring in renovation costs, to ensure you are getting what you need at a competitive price. Speak to a financial professional to help you find an efficient plan that meets your needs, taking into account savings, investments, and refinancing options.
— Steve Oniya | President of OM Investments and Certified Financial Consultant
I am still working and have not retired yet.
- What’s best for you: Home improvement loans, home equity loans, HELOCs.
Bankrate’s 2023 Retirement Savings Survey found that 56% of working Americans believe their retirement savings are lagging behind where they should be.
If you’re still working but want to retire in a place you’re comfortable living in, now is the time to start planning. If you own a home, you need to start making your property more accessible as soon as possible.
Ideally, you’d spread out your renovations over time to cut down on costs and hassle. But depending on your age and timeline to retirement, you may need to tackle several renovations at once to ensure your property is ready.
Bankrate Tips
Renovating your home for retirement doesn’t have to be a cold, sterile design — in fact, incorporating retirement renovations into other home improvement projects is usually more effective than trying to tackle them as a one-off project.
I am retired and have a fixed income
- What’s best for you: Home Equity Loans or HELOCs, Government Assisted or Reverse Mortgages.
Like many retirees, Social Security may be your only source of steady income, so funding the accessibility improvements you need can be difficult, but finding the money isn’t impossible.
Your best option is to tap into the equity you’ve built in your property or consider a reverse mortgage (also known as a home equity conversion mortgage). A reverse mortgage is a type of loan in which you receive money from your home’s equity, either as a lump sum or in regular monthly payments. Repayment is made when the borrower dies, sells the home, or moves out permanently.
If you choose to leverage your home’s equity, make sure you intend to stay in it for at least another 10 years.
You might also consider FHA-insured improvement loans, such as Title 1 property improvement loans or 203(k) loans. Because each loan is guaranteed by the federal government, you’ll likely qualify for a lower interest rate than other improvement loans or personal loans.
Another option is to apply for government or state grants. Some agencies, such as the U.S. Department of Housing and Urban Development, offer home improvement grants for seniors.
You’ll need to meet certain income and age requirements to take advantage of these, which makes them a bit more restrictive than other funding options, but since it’s money you don’t have to pay back, it’s worth a try.
I plan to live with my family
- What’s best for you: Proceeds from the sale of a home, a personal loan, or a low-interest credit card.
- Best for your loved ones: Home Equity Loan or HELOC.
Living with family and loved ones means you have fewer options to customize your living space. Start by discussing with your loved ones possible renovations to make your home safer and more accessible.
Naturally, you’ll want to help your loved one afford these renovations or cover them entirely. If you sell the home before they move in, you could use the proceeds to cover the renovation costs. If you’re not selling the property, you might consider a personal loan or low-interest credit card to cover the costs.
If you have older loved ones moving into your current home, carefully consider the space they’ll live in. If you don’t have a dedicated room where they can stay, consider adding a mother-in-law room or accessory dwelling unit on the property.
If you have a spare room, make an effort to improve the accessibility of that room before your loved one moves in. The small changes mentioned above are a great place to start, as are updating the bathroom you use.
A mortgage can help cover the cost of these renovations as well as other expenses your loved ones may need as they age. You may also want to consider a mortgage line of credit, depending on your financial situation.
How seniors can get home renovation loans
The first step is to research and find out what programs are available in your area. Often these types of programs are offered by state or local governments, but some are offered by federal agencies such as the USDA. Start by contacting your state’s Department of Housing and Urban Development to find out what programs are available to you. Requirements vary by program.
Private lenders also offer home improvement loans, but they aren’t specifically designed for seniors. In most cases, you’ll need:
- Credit score of 600 or above.
- A stable source of income.
- A debt-to-income ratio of less than 36%.
To qualify for a mortgage or HELOC, you typically need to meet the following requirements:
- Your home must have at least 20 percent equity in it.
- Credit score of 620 or above.
- A debt-to-income ratio of 43 percent or less.
- A stable source of income.
No matter what type of loan you choose, it’s a good idea to shop around and find a program that offers terms that best suit your financial situation and needs.
