Many senior citizens are house-rich but cash-poor, possessing significant home equity but not enough liquid assets or income to qualify for a traditional loan. Reverse mortgage giant Longbridge Financial is addressing this gap with a new home equity line of credit (HELOC) for homeowners 62 and older.
Longbridge’s HELOC for Seniors incorporates elements of both a traditional line of credit and a reverse mortgage. Borrowers can get approved in as little as 15 minutes for between $50,000 and $400,000 during the 10-year draw period. (There’s a maximum of 25 draws and at least 80% of the line of credit must be taken at funding.)
Longbridge Financial HELOC for Seniors
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Loan types
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Minimum credit score
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Maximum loan-to-value
Combined LTV ratio of 75%
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HELOC draw amount
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HELOC draw period
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Repayment period
Interest-only payments until the house is sold,or the borrower moves out, dies or fails to keep up with housing expenses.
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Availability
Longbridge Financial offers HELOCs for Seniors in Arizona, California, Colorado, Florida, Georgia, Idaho, Massachusetts, New Jersey, North Carolina, Oregon, Pennsylvania, Utah and Washington.
Pros
- Maximum loan amount of $400,000
- Can make interest-only payments as long as you live in the home.
- Seniors on fixed incomes may qualify.
Cons
- Not available in all states
- $50,000 minimum is higher than many other lines of credit
- Full payment is due when the borrower sells, vacates or dies.
Rather than a typical 20-year repayment phase, however, the full principal isn’t due until the borrower sells the house, stops using the property as their primary residence or passes away. That’s provided they maintain the home and stay current on interest payments, property taxes, and homeowners’ insurance.
Additionally, the HELOC for Seniors has a fixed rate, unlike the variable rate associated with most HELOCs.
Read on: The best lenders for home equity lines of credit
According to Longbridge, applicants with sufficient equity and assets may qualify even if they rely on retirement savings, disability benefits or other fixed income sources.
To qualify, you need a credit score of 660, a debt-to-income ratio of 50% or less, and a combined loan-to-value ratio of 75% or less. Additionally, you must have owned the property for at least 90 days prior to applying.
As with a traditional reverse mortgage, also known as a home equity conversion mortgage (HECM), applicants must be at least 62 years old, a U.S. citizen or lawful permanent resident and use the home as their primary residence.
Read on: Longbridge Financial reverse mortgage review
Eligible properties include single-family homes, townhomes, condos, duplexes and planned unit developments. Co-ops, manufactured homes, multi-family properties and houses on the market or with an existing reverse mortgage are not eligible.
To launch this hybrid product, Longbridge partnered with fintech company Figure, one of the largest HELOC lenders in the U.S.
The absence of a maturity date or balloon payment allows seniors to, “live more comfortably, not more cautiously,” says Longbridge CEO Chris Mayer.
“Too many older Americans are unable to access their own home equity, not because of poor credit, but because traditional lending products weren’t designed for life after 62,” Mayer said in a statement. “We built HELOC For Seniors to offer a better way forward.”
Read on: The best lenders for reverse mortgages
The HELOC For Seniors is available in Arizona, California, Colorado, Florida, Georgia, Idaho, Massachusetts, New Jersey, North Carolina, Oregon, Pennsylvania, Utah and Washington.
According to Longbridge, more states will be added soon.
HELOC FAQs
How does a HELOC work?
A traditional home equity line of credit is a type of second mortgage that allows you to use the equity you’ve built up in your property as collateral for a loan. Your lender will determine the maximum draw, which can be more than 85% of your home’s value. You can continue using the line and make only interest payments during the draw period, which is typically 10 years. After that, you’ll make monthly payments on both the principal and interest, usually for a 20-year period.
How is Longbridge’s HELOC for Seniors different?
Instead of monthly payments during a 20-year repayment phase, payment is due in full when the borrower sells the home, ceases using it as their primary residence or passes away. While traditional HELOCs don’t have age requirements, you must be at least 62 to be approved for Longbridge’s HELOC for Seniors.
How much can I borrow with a Longbridge HELOC?
Borrowers can access a line of credit ranging from $50,000 to $400,000 during the 10-year draw period. There is a maximum of 25 draws, however.
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