HELOC or Personal Loan??? (pay, taxes, rates, credit)

[delaa]

hello...i will try to keep this short and as uncomplicated as possible. but any feedback would be greatly appreciated. thank you in advance.

my father has paid off his house in full. he lives off of his retirement, which pretty much covers basic living expenses and the home's taxes (which are ridiculously high - located on long island)

to say the house is in bad shape would be generous. it needs work. bad. my dad has always been a DIY type of person. but honestly, he's getting too old for that mess.

so we are investigating how to go about funding the repairs on the house...the list goes on and on...new roof, windows, etc..

i've been doing some research on helocs but neither of us really have experience with this option and my dad has worries about getting the house involved with debt again. ok...to my questions...

1) based on the info given above, would you recommend a personal loan or heloc? or even a home equity loan ? i figure given the amt of work to be done, an heloc would be better, but i'm not sure.


2) as far as payment goes on helocs - i'm seeing a lot of interest only monthly payments during the draw period and then you pay off the balance after that. is that the norm? (not feeling that at all )


3) is now a good time to get heloc ? i know interest rates for helocs are lower than personal loans and equity loans, so that's covered. but i'm worried about the rates going up in the near future. oh yeah, and i would say my dad's credit rating would be in the GOOD range.


i would really appreciate some help with the matter. thank you very much.

[Darrow]

Your father is a wise man not wanting to go down debt highway again after working his whole life and owning his home. So if there isn't enough left of your father's retirement - who exactly will be paying for the HELOC debt? You said yourself the retirement just covers basic living expenses and taxes.

If the home is in such a state, maybe he should sell and look at other living arrangements...or maybe he doesn't feel the way you do about the house. I would respect his aversion to debt and start talking about saving for those items.

[chet everett]

If your dad's home is paid off and he is retired he may be an EXCELLENT candidate for a REVERSE MORTGAGE -- this would allow him to tap his equity WITHOUT HAVING TO PAY IT BACK. Depending on what sort of repairs are needed for the house a reverse mortgage might be the IDEAL way to make the home more up-to-date/ energy efficient/sellable.

I would strongly DISCOURAGE a personal loan, as the interest rates are quite unfavorable.

The rates on HELOCs are generally variable, which are not a good fit for people on a FIXED income. Some 'straight" home equity loans have fixed rates, but downside is that must be paid back over a fixed term.

Dad could benefit from a REVERSE MORTGAGE as the equity he has would be funded to him, either lump sum or over time, and he would NOT MAKE ANY PAYBACK while he was alive and living in the house. When the house is sold or his estate is settled the reverse mortgage would be resolved. That sounds IDEAL for his situation!

[Elke Mariotti]

Based on the background picture you painted, I believe a HELOC won't work--not only because they're currently difficult to obtain but also because it doesn't sound as though there is the adequate income necessary to get past the underwriting process.

Reverse mortgages definitely have a place - but a lot depends on your dad's age (officially you have to be at least 62 to be eligible); the amount available to him is based on his life expectancy, so the younger he is, the lower the amount. In addition, closing costs are relatively high, so is there is enough money available to him to make it worthwhile? We don't have enough information to make that determination.

Do you have an approx. amount in mind for some/all repairs? A list in order of priorities?

I too am from Long Island, so I know what you're talking about re high taxes. Is he getting all STAR and other exemptions he's entitled to?
Is there any way you - and other siblings, if any - can help with some of the cost?

Adding to his expenses via any type of loan doesn't sound like a fiscally responsible solution to me...