CBS News
Is a HELOC safe for seniors now?
NOVITSKIY.PHOTO/Getty Images
Once retired, your budget may become more limited. Without a steady income to rely upon, many seniors may instead turn to Social Security and retirement savings to help make ends meet. For senior homeowners, however, there may be a smart and cost-effective alternative to access large sums of cash – their home equity. With the average homeowner currently having approximately $200,000 worth of equity to utilize now, home equity loans, home equity lines of credit (HELOCs) and reverse mortgages all have unique value in today’s economic climate.
HELOCs, in particular, have pros and cons, including a lower interest rate than many other credit options. But they also come with inherent risks that may be worth avoiding, particularly for seniors who have a small buffer for financial missteps. To that end, below we will break down what seniors should consider before pursuing a HELOC right now.
Start by seeing how much home equity you can access here.
Is a HELOC safe for seniors now?
First, seniors should consider the benefits of a HELOC.
Not only will it allow you access to potentially hundreds of thousands of dollars but that access will come via a lower interest rate than most alternatives. Credit cards have an average interest rate hovering around 21% now while personal loans are around 12%. But HELOCs, because they use your home as collateral, come with rates around 9% right now. And the likelihood of that rate falling further as the year progresses could rise as inflation cools and interest rates are cut, thanks to the variable rate nature that HELOCs come with.
Other advantages may be attractive for seniors, too. Interest paid on HELOCs is tax-deductible if the funds are used for qualifying home repairs or renovations. And you’ll only need to pay interest on the amount utilized, not the full credit line you’ve been approved for. So, if you secure the HELOC to help pay expenses or debt, but realize you don’t need as much as you applied for, you’ll only pay interest on the amount used (the direct opposite of home equity loans, in which borrowers will get saddled with interest on the full loan amount).
See what HELOC rate you can secure here now.
But there are substantial risks HELOCs come with that seniors should be aware of, too.
A variable rate is positive in a climate in which rates are dropping or holding steady at a low APR. They’re less advantageous, however, when rates are high and interest rate cuts are minimal. Although a cut to the federal funds rate looks imminent, which will lower the rate on home equity borrowing, only one cut is expected for 2024 at this time of the year.
So, seniors will need to weigh this risk before getting started. And if inflation somehow starts increasing again, and a rate hike becomes required, the rates on HELOCs will also follow, making them more costly to repay. This would be a problem for seniors who need access to low-interest-rate funding.
Consider a home equity loan instead
For those seniors interested in using their home equity but leery of the variable rate nature of HELOCs, a home equity loan could prove to be a viable alternative. These work similarly to HELOCs but come in a lump sum versus a revolving line of credit. They also have fixed rates, which will only change if you elect to refinance to a lower rate in the future.
And, right now, they come with slightly lower rates than HELOCs (8.60% on average, as of June 26, versus 9.17% for HELOCs). Home equity loan interest is also tax-deductible for qualifying home projects, for those who need the money to fix up or renovate their current home.
The bottom line
Both HELOCs and home equity loans come with unique advantages and disadvantages. But for seniors looking for a safe and effective way to access financing, a home equity loan is likely the better choice. With a combination of lower rates and a fixed nature, this borrowing option is safer for seniors in need of some extra financing. Ultimately, however, the decision will be up to the individual homeowner and their financial situation so it’s critical to weigh the pros and cons of both before acting. If you don’t, you could risk losing your home if you can’t pay back what you borrowed.
Start researching your HELOC and home equity loan options now.
NEW YORK — Former New York Gov. David Paterson and his stepson were attacked in New York City on Friday night, authorities said.
The incident occurred just before 9 p.m. on Second Avenue near East 96th Street on the Upper East Side, according to the New York City Police Department.
Police said officers were sent to the scene after an assault was reported. When officers arrived, police say they found a 20-year-old man suffering from facial injuries and a 70-year-old man who had head pain. Both victims were taken to a local hospital in stable condition.
In a statement, a spokesperson for the former governor said the two were attacked while “taking a walk around the block near their home by some individuals that had a previous interaction with his stepson.”
The spokesperson said that they were injured “but were able to fight off their attackers.”
Both were taken to Cornell Hospital “as a precaution,” he added.
Police said no arrests have been made and the investigation is ongoing.
The 70-year-old Paterson, a Democrat, served as governor from 2008 to 2010, stepping into the post after the resignation of Eliot Spitzer following his prostitution scandal. He made history at the time as the state’s first-ever Black and legally blind governor.
Watch CBS News
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.
A 17-year-old boy was critically injured and a person is in custody after a gunman opened fire on a SEPTA bus in North Philadelphia Friday evening, police said.
At around 6:15 p.m., Philadelphia police were notified about a shooting on a SEPTA bus traveling on Allegheny Avenue near 3rd and 4th streets in North Philadelphia, Inspector D F Pace told CBS News Philadelphia.
There were an estimated 30 people on the bus at the time of the shooting, Pace said, but only the 17-year-old boy was believed to have been shot. Investigators said they believe it was a targeted attack on the teenager and that he was shot in the back of the bus at close range.
According to Pace, the SEPTA bus driver alerted a control center about the shooting, which then relayed the message to Philadelphia police, who responded to the scene shortly.
Officers arrived at the scene and found at least one spent shell casing and blood on the bus, but no shooting victim, Pace said. Investigators later discovered the 17-year-old had been taken to Temple University Hospital where he is said to be in critical condition, according to police.
CBS Philadelphia
Through their preliminary investigation, police learned those involved in the SEPTA shooting may have fled in a silver-colored Kia.
Authorities then found a car matching the description of the Kia speeding in the area and a pursuit began, Pace said. Police got help from a PPD helicopter as they followed the Kia, which ended up crashing at 5th and Greenwood streets in East Mount Airy. Pace said the Kia crashed into a parked car.
The driver of the crashed car ran away but police were still able to take them into custody, Pace said.
Investigators believe there was a second person involved in the shooting who ran from the car before it crashed. Police said they believe this person escaped near Allegheny Avenue and 4th Street, leaving a coat behind.
According to Pace, police also found a gun and a group of spent shell casings believed to be involved in the shooting in the same area.
“It’s very possible that there may have been a shooting inside the bus and also shots fired from outside of the bus toward the bus,” Pace said, “We’re still trying to piece all that together at this time.”
This is an active investigation and police are reviewing surveillance footage from the SEPTA bus.