Home equity loans for adoptions
Bob Tedeschi, New York Times

For adoptive parents, bringing a new baby into the home can be costly. One national bank has begun helping such families more easily afford the financial burdens of adoption by tapping into their home equity.

Chase, a division of JPMorgan Chase & Co., last month introduced New Additions, a program that offers adoptive parents a discounted home-equity loan. Adoption advocates say it is the first service of its kind and will give the 125,000 families who adopt children each year in the United States significantly more financial flexibility.

“For families who are spending $20,000 or $30,000 to adopt internationally, it can really help,” said Rita Soronen, executive director of the Dave Thomas Foundation for Adoption in Dublin, Ohio. “It’s very significant.”

The Chase program works like other home-equity loans, in that borrowers take out a line of credit against the equity in their homes, borrowing money and paying it back as they would a credit card.

As they have with everything else in the mortgage market in recent months, banks are making home-equity loans much more cautiously.

Chase’s New Additions product is no exception. Only those with more than 10 percent equity in their homes can qualify, and applicants must also have credit scores above the subprime level, which is typically in the low-to-mid-600 range. The maximum amount of the credit line varies with applicants’ credit histories and the amount of equity they have in their homes.

The initial interest rate varies according to a number of factors, including the applicant’s credit history. Once the loan is made, the interest rate fluctuates according to the prime interest rate, which is the rate banks offer their best customers.

Whatever interest rate an applicant qualifies for, Chase discounts that rate by a full percentage point for New Additions customers for the first six months.

Earlier this month, for instance, a borrower in Rye, N.Y., with excellent credit and 50 percent equity in a $400,000 home could qualify for a line of credit of up to $160,000 at an interest rate of 7.25 percent. The New Additions discounted introductory rate would be 6.25 percent.

Mary Jane Rogers, a Chase spokeswoman, said the company hopes to add other benefits to the program in the coming months, like discounts on travel and international phone expenses. International adoptions can cost up to $40,000, or $10,000 more than the typical domestic adoption, partly because of greater travel and communication expenses.

More information is available online at www.chase.com/newadditions.

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Adoption can be very costly (with the exception of adopting through foster care) and we asked our adoption forum members for advice on how they financed their adoption.

** We’re saving, saving, saving. If we wait as long as our agency says the average is–15-18 months–we’ll have enough to cover agency fees and probably attorney costs by the time the baby is born. If it happens sooner, we’ll use the available space on our home equity line of credit to make up the difference. If it happens later, I guess we’ll have extra money…we can have dinner at an expensive restaurant and weep into our costly wine over the lack of a baby. Our agency fees, by the way, are an $850 application fee (which we will send with our completed materials, probably in the next week or two), and a total of about $9000 in agency fees. Attorney fees will probably be about $1200. We’ll also have travel costs when the baby is born, since our agency is in a city about four hours away from us…but I can’t deal with trying to estimate what that will be and trying to save for it on top of the $600/month we’re already squeezing out of the budget for the adoption fees. I’m also not trying to guess what birthmother expenses we might have…I haven’t even managed to think through the question of what we are willing to pay for bm expenses. So I’m sure there will be some increase in debt associated with the adoption as well. We’ve already paid for the home study with previous savings.

** Saving, scrimping, robbing Peter to pay Paul … we basically paid cash for everything when all was said and done. The second time around, I’m considering asking my family for help in the form of personal loans … I have a very wealthy older brother and another who is fairly well off, so I might be able to get some short term loans from them if I’m nice.

** My dh dipped into his 401K and then paid himself back.

** We refianced our house and took money out to pay for our adoption.

** For the next to the last, we re-financed our home and borrowed more. It was smart to do anyway (the refinancing) because the interest rate was considerably lower (fixed, 30yr at 5.876%.)
For the most recent baby, we HAD gone to various banks who gave us strange looks at the suggestion that they might give an adoption loan! Finally, we DID find one bank that would; but the interest rate was higher than I could get through my Discover Card (unsecured loan). We took out a loan with them, (around 7 or 9% as I recall), then ended up combining this amount with an existing loan on farm ground. The result ended up being one loan at 7%. We’re still paying on this one. But, I’m finding that in hopes of having another……fees are SO much higher and although our attorney and agency have said they’d take payments……….just don’t know now if we can come up with that much cash anymore! we know we could take out another loan, but hate doing this too.

** I have a wonderful family member that loaned us $20,000, at 0% interest and we can pay it back at our convenience.

** home equity loan

** Our agency took monthly payments. We paid mostly cash and borrowed a little from dh’s 401k. I couldn’t tell you where the extra money came from. This time around I’m working part time, so we are trying to save for the first couple of payments and finish paying with the adoption tax credit refund in 2007.

** We put both adoptions on our credit card by taking out a cash advance and then going to the bank for a certified bank check for the agency. We did not have to pay for very much prior to placement. The little things we paid cash for. Dh is very good about bouncing it from card to card to get “0%” interest (or very minimal %). We have found that the bigger the sum of money we borrowed on a credit card, the more the credit card companies solicited us to join them and offered us great deals to do so. We did pay off adoption 1 before starting adoption 2.

Related Tags: adopt, adoption, adopting

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Ali said…
I am so glad I stumbled across your blog! First of all, your picture is wonderful. Those kids are very fortunate to be involved with the foster parents like that.Second, I have been looking into adoption recently, and was discouraged about the costs. I would love any kind of advice, or information about making it more affordable. How can a lower income family afford it?

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Thirteen ways to help finance adoption costs 1. Look for ways you can cut back, they may add up to considerable savings. Put that money into a seperate high interest account. Do you need two cars, 300 premium cable channels, all those magazine subscriptions? 2. Refinance your home 3. Hold a fund raiser like a carwash, bingo game, 5K run. etc 4. Take on a part time job and put your salary into a seperate account 5. Hold several garage sales. Ask neighbors, friends and co-workers to donate stuff. 6. Ask if your agency will take payments 7. Borrowing from a rich family member or friend 8. Borrow from your 401K 9. Play the lottery (hey-you never know) 10. Maybe now is the time to sell off that comic book collection you’ve had since you were twelve (or any other valuable collection you have gathering dust). Try ebay. 11. Set up a webpage and post about your progress daily. Set up a donations link (paypal can help with that) and send the link to everyone you know. And ask them to send it to everyone they know. 12. Check with your employer if they have any type of adoption reimbursements. 13. If you’re in the military, get information on their adoption subsidy program. Feel free to leave the link to your Thursday 13 list in the comment section so we can visit!

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