Tom Davidson has written and illustrated a great article which I believe you will enjoy reading. Here are the first few paragraphs which lead into the link to his thoughtful presentation:
“HELOCs (Home Equity Lines of Credit) are widely used. Simply having one makes many people more comfortable. My wife and I had a standby HELOC for many years – ready to use as a convenience or in an emergency. Luckily that emergency never happened, but we felt well prepared knowing we had ready access to a substantial amount of cash that could be used for anything we needed. When I was a financial advisor, a HELOC was on my checklist to discuss with every client – at least those who were prudent with their money.
ReLOC: A Retirees Line of Credit
Is there a better alternative for homeowners over age 62? A ReLOC may be a far better choice for many retirees. ReLOC is a nickname that stands for either Retirees Line of Credit or Reverse Mortgage Line of Credit. While ReLOCs share many features with HELOCs, three unique features make a ReLOC a line of credit designed for retirees:
- The amount you can access grows every month
- You don’t have to make payments until you permanently leave your home
- The loan can’t be canceled, reduced, or frozen as long as you keep up with basic mortgage obligations (property tax, homeowner’s insurance, basic maintenance, and Homeowner’s Association dues).
Here’s the borrowing limits for a ReLOC and a HELOC for a 63-year-old in a $400,000 house who lives to age 99:”
Source: Do you prefer a ReLOC or HELOC? – Tools for Retirement Planning
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