Using a HELOC to purchase a condo can provide flexibility, but also has drawbacks to consider.

From Yahoo Finance: 2025-04-27 07:13:00

A 2024 AARP report found that 75% of Americans ages 50 and over want to age in place, preferring to stay in their current homes. But for some, downsizing to a condo may be a better option to reduce workload and expenses with limited real estate inventory. Considering a home equity line of credit (HELOC) to purchase a condo instead of selling your home? Here’s what to consider.

HELOCs offer flexibility, allowing you to borrow against your line of credit and use only what you need, with a 10-year draw period. This can be beneficial for unexpected expenses after purchasing a new home or condo, with potentially competitive interest rates based on credit score.

However, using a HELOC to buy a condo has drawbacks to consider. You’ll have to pay it back over as many as 20 years, which can be a burden as retirement approaches. Plus, interest rates are not fixed, posing a risk if rates rise and payments increase on a fixed income.

Other funding options for purchasing a condo include taking out a mortgage, selling your home first with a contingency, or selling your home and renting it back. If you have substantial savings outside of retirement accounts, consider paying for the condo in cash to maintain liquidity.

There are many options to consider when downsizing to a condo. While a HELOC may be a viable choice, it may not always be the best option. Evaluate your financial situation carefully and choose the option that best suits your needs and goals.

Read more: Widowed at 57? How a HELOC can help you downsize and buy a condo without selling first