As a homeowner, your house is likely your biggest asset. It can help you build wealth and improve your finances — and in retirement, it might serve as a much-needed source of financial support.
That last part is important. Whether you’re 25 or 65, having a plan is critical to an enjoyable and worry-free retirement.
Want to know how your home can help you plan for your golden years? Here are four ways:
1. You can leverage your home equity. If you have owned your home for at least 5 years you may be sitting on a material amount of equity. Home prices in the DFW area have risen between 50% and 70% between 2017 and today, and an average of 13.6% since last year.
This means that most homeowners are sitting on serious amounts of equity and it is estimated that the total equity in homes in the U.S. is more than $1.1 trillion. This means that your Loan-To-Value could be more than 20%, so if you had to have Private Mortgage Insurance (PMI) when you purchased your home you should be able, depending on your loan agreement, to have that removed. This could save you a nice sum of money monthly.
You can tap into that equity by taking out a home equity loan or home equity line of credit (HELOC). In retirement, these can be great options for covering medical bills, paying off higher-interest debts, or funding home improvements.
2. You can sell and use the profits. Many retirees choose to sell their homes and downsize to a smaller property. If you decide to take this route, you can use the sale proceeds to support your retirement — plus, you’ll enjoy a smaller home that’s easier to maintain.
3. You can refinance. Refinancing could help in a couple of ways: A regular refinance may help you reduce your monthly payment and create liquidity. But if you opt for a cash-out refinance, it could also give you funds to use toward your retirement goals..
Another way to tap into this equity is to refinance to a Reverse Mortgage. A reverse mortgage is just like any other mortgage you would get (Conventional, VA, FHA). It is a loan, backed by the Federal Housing Administration (FHA).
The bank loans you money, charges interest and wants to get paid back, like all loans. The major difference between a traditional mortgage and a reverse mortgage is that the reverse does not require ANY monthly mortgage payments. In fact, as long as you live in the home, keep it insured and maintained, and your property taxes and homeowners' association current (if you have one), you'll NEVER have to make a mortgage payment again. For additional information see our website page atFacts &Myths About Reverse Mortgages.
Add to this property tax exemptions beyond the usual 'Homestead exemption' and you can see a complete ‘reversal’ in your monthly housing costs with a liquid investment account you can typically tap as you need with no interest. See our website page for Property Tax Exemptionsand more information on these and some that provide 100% relief from all property tax for life.
4. You can rent out your home. Your house can become a source of regular income in retirement if you rent out a room or the whole home for short- or long-term tenants. The popularity of such facilitating companies as AirBnB can simplify short term rental and a local Realtor can assist with long term lease of your property if that is your goal. Get in touch to learn about local laws and restrictions.
A home can be a valuable financial asset at any life stage. For more information on our services for Baby Boomers and Seniors see our webpage at Senior Solutions.
If you are in the position to consider moving into a 55+ or Adult Community you should take advantage of our Senior Advocate Servicesthat provides a full range of options to guide you in finding the right fit for you at this time. We aim to make your real estate decisions Stress-Free.
Perhaps you or your senior parent have discovered unused space in your home or don’t want to maintain all the space you have any longer. If this is the case than you may be ready to downsize, or "right-size," to a smaller property. While letting go of the house you’ve called home might not be easy, it just might be the right decision, both financially and practically for your future. The opportunities and cost savings are nearly endless and many are discussed in this book.
Are you interested in buying a new property? Get in touch today for help. You can use the contact form below to reach us and let us know what area has your interest.