FG Trade/getTyimages; Illustrations by Hunter Newton/Bankrate
If you are struggling under the weight of your healthcare costs or are worried about covering future care costs, there may be one way to reduce the burden. But is that a wise move? Read the complete inspection to determine if the procedure is worth the risk.
Can you use your home to pay for medical expenses?
If you have a considerable stock interest in your home – it means you have paid off your mortgage chunk – yes, you can borrow and pay medical expenses for it. One easy way to leverage funds is through the Home Equity Line (HELOC), which gives homeowners flexibility in both borrowing and repayment.
To approve one, you must follow the standards of Hellock and Home Equity Loan lenders. This usually requires you to have 20% stake in the property, leaving at least 10-15% untapped.
How does HELOC pay for medical expenses work?
HELOC is a spinning form of credit and acts like a credit card with a very large limit (up to $500,000 or more). Once a credit line has been established, you can withdraw the total on a rolling basis. Some lenders require a large minimum draw when opening HELOCs. You can literally access these funds in a variety of ways, including online transfers, checks, and debit cards connected to your account.
You can borrow money during the first phase of HELOC, known as the draw period. Usually it lasts up to 10 years. It usually lasts up to 10 years, and in many cases, a minimum monthly payment of only interest is required. Once the draw period ends, you will enter a repayment period, and you will be repaid the money you borrowed and interest during that time.
The repayment period can last for 20 years, but you usually have the option to pay off your HELOC faster.
Pros and cons of using HELOC for medical expenses
HELOC may sound like a solution to clean up your healthcare costs, but like any other financial strategy, it has its advantages and disadvantages.
Things to consider before using your home capital to pay your medical bills
Using home equity for medical expenses is not your first option. While you can make your cash accessible faster, there are many drawbacks and risks. The biggest thing is that you have your home on the line. If you defaulted HELOC, the lender can grab the place and kick you out.
You also need to consider how you want to portray your funds. If you use them to tackle existing debt chunks, you probably want to have a one-off draw. If you are referring to them for future expenses, you will want to withdraw funds if necessary. In either case, you have a plan to pay them back by focusing on the fees your lender charges. Many lenders will either leave the line open or, conversely, charge prepaid penalties to close earlier than the scheduled period.
HELOC alternatives for medical expenses
If you are thinking of using your home capital to cover your medical debt, here are some options you may consider – it does not involve placing your home on the line. Be sure to compare the terminology and overall cost of HELOC borrowing for these other methods.
Payment Plan
Many hospitals and healthcare providers can provide payment plans to patients and pay their medical obligations in installments. Usually, monthly payments and repayment periods can be negotiated. Most are interest free, but be sure to ask about fees and prepaid fees.
Support Program
Medical assistance programs can be a great resource for many people with medical debt. Some organizations, such as The Healthwell Foundation and Patient Access Network (Pan) Foundation, offer grants that help you pay off your debts more quickly. These groups will help you connect with resources to negotiate your medical debt, or get more affordable healthcare. (look “Here are some tips for repaying your medical expenses. ) These programs are often needs-based and require meeting eligibility requirements that are usually related to income.
Negotiation of bills
Reducing your bills may be as easy as calling your doctor’s billing department. Ultimately, doctors and hospitals want to receive payment for services and may be willing to ease some of their debts if they can’t fully repay them. If you need to help negotiate medical expenses, consider working with an advocacy or nonprofit organization specializing in debt relief. However, some of these organizations may charge fees for services.
