Inside Florida Home Improvement Loan Options

What if you’re in retirement and in need of a Florida home improvement loan? Such a question was recently raised by a 64-year old individuals interested in around $75,000 worth of upgrades.

The owner said he possessed $300,000 in home equity and wanted to refinance with an interest-only Florida home mortgage in order to keep payment low. From there, perhaps a reverse mortgage or IRA monies were proposed in order to pay the taxes on that distribution?

Here’s the advice he received:

As a married, retired owner withh an annual income of about $45,000 per year and excellent credit, this individual owns a house worth approximately $550,000. There is about $200,000 in outstanding Florida home loan debt on the home.; and about $150,000 in retirement accounts.

Now, lending limits on the two main reverse mortgage programs, HECM (Home Equity Conversion Mortgage) and Fannie Mae Home Keeper, won’t let you receive a $275,000 reverse mortgage. That’s because the first step in getting a reverse mortgage is to pay off any existing mortgages with the proceeds from the reverse mortgage.

It’s an expensive way to tap the equity in your home, anyhow.

Instead, what about a home equity line of credit? Granted, because it’s a variable-rate loan, you are taking on the risk that short-term interest rates continue to head higher. However, there are two reasons why a HELOC could work in this situation:

1. The payments are interest-only in the early years of the loan
2. Closing costs are minimal

The downside is the national average interest rate on a HELOC is currently 8.21 percent.

A cash-out first Florida home mortgage can also make sense if the rate is competitive with the rate on your existing mortgage. The national average for a 30-year fixed-rate mortgage is currently 6.49 percent. Saving 1.72 percent versus the HELOC rate can justify paying the higher closing costs.

Although it’s not interest-only, the extended loan term on the $275,000 loan balance should make the payments affordable. As you can tell, there are many variables to consider. Discuss your options with out Florida mortgage brokers today and we’ll make sure you arrive at the proper conclusion.