Paying for care
Home equity loan
A home equity loan is a lump-sum loan secured by your home. You borrow against equity, which is the home's value minus what you owe on it. The rate is usually fixed, so payments stay the same. A home equity line of credit, or HELOC, works differently. It is a revolving credit line.
Why it matters for your family
Some families use home equity to pay for care so a parent can stay at home. The CFPB notes that both loans use the house as collateral, so a lender could foreclose if payments are missed. A loan adds a monthly bill, which can be hard on a fixed income. A common mistake is to borrow more than the family can repay. Another is to forget how a loan affects Medicaid planning later. Compare interest rates and fees from several lenders. A financial professional can help you judge the risk.
Source: consumerfinance.gov
Related terms
- Reverse mortgageA reverse mortgage is a loan that lets homeowners borrow against home equity without making monthly mortgage payments.
- Private payPrivate pay means a family pays for care directly from its own money.
- Medicaid planningMedicaid planning is the legal arrangement of income and assets so a person can meet Medicaid rules for long-term care.
- Aging in placeAging in place means staying in your own home as you get older.
- Cost of home careThe cost of home care is the amount a family pays for in-home help.
- Elder law attorneyAn elder law attorney is a lawyer who focuses on legal issues of older adults.
