How Your Home Can Help Fund Your Retirement
We recommend homeownership as a part of any consumer’s long-term financial plan. We’re not talking about ‘flipping’ homes or trying to make a quick profit—we urge people to become homeowners for life. One’s goal should be to own a home by the time retirement comes.
The primary benefit of homeownership to retirees is not having a mortgage payment or rent payment to make every month. Starting early in life and paying off a mortgage by the time you retire leaves you with a roof over your head and more manageable monthly expenses during your golden years.
There’s another way homeownership can help retirees, though; a Reverse Mortgage, or HECM (Home Equity Conversion Mortgage). With a reverse mortgage, you get a loan against the value of your property, but you don’t have to repay as long as you are in the house. The bank pays you in regular payments, or one lump sum, and you continue to pay your own insurance and property taxes. If you move or when you pass away, the loan is repaid, usually with the sale of the home.
There are many advantages to a reverse mortgage:
- Guaranteed source of income, tax-free
- You get to stay in your home
- You don’t have to repay anything until you die or move
Of course, there are some disadvantages to reverse mortgages as well:
- They can be expensive
- Your kids probably won’t inherit your home—the bank may sell it to recover the cost of the reverse mortgage
- You can’t move, even if you want to, or you’ll have to repay the reverse mortgage amount
- You must be able to afford upkeep, insurance & taxes
Anyone considering a reverse mortgage should first ensure they meet the requirements:
- Must be 62 years of age
- Must complete reverse mortgage counseling
A HUD-approved housing counseling agency can provide the necessary reverse mortgage counseling, and answer any questions you may have. A reverse mortgage can be a great tool for retirees, but it’s a big decision that should only be made after careful deliberation. We’re here to help with on-demand counseling. Call us today at (800) 294-3896 to learn more.