The equity in your home can contribute significantly to boost your retirement savings and to improve your spending ability.
There are five ways to tap into your home equity; however, each method has its own pros and cons. It is, therefore, essential that you have a complete understanding of each method before you venture further.
Paying Off Your Mortgage
Living in a mortgage-free home after retirement is an ideal situation where you save quite a lot on your monthly bills. The bills that you will have to pay include taxes, insurance costs, and maintenance costs; however, you will be free from a mortgage payment. Having a mortgage-free home can be a big advantage while living on a limited income.
Down Paymentsizing Your House
You may consider selling your home and moving to a smaller and less expensive house. This helps in increasing your retirement savings and also reduces your monthly expenses. Property taxes, insurance, maintenance, and utility bills are directly proportional to the size of the house; moving to a less expensive house reduces these bills as well.
When you are working, you may prefer to live near your workplace so that your commute is reduced. The same reason works for parents of school-age children who live near the school their children attend. When you are retired or your children have moved out of your home, the requirement of staying near the workplace or school district does not exist anymore. Now is the time to choose a location close to recreational facilities, suitable medical care, and affordable transportation that will suit retirement life. You may even chose a place close to family or a place with good weather and scenery.
A reverse mortgage is available for homeowners who are 62 years of age and older. A reverse mortgage allows a homeowner to receive a payment against the value of their house while they continue to live in the same house. A reverse mortgage payout can be received as a lump sum amount, monthly payments for a certain duration, or as a line of credit. The downside is that there are expenses attached with a reverse mortgage such as an origination fee, mortgage insurance, and service charges.
Become a Renter
When you become a renter after selling your house, you may have the advantage of increasing your retirement savings. As a renter you can always call your landlord for essential and emergency repairs. You will also save yourself the trouble of household chores like mowing the grass or shoveling the snow.
The mortgage team at Sean Z Mortgage can help you review your options to decide which one will be the most beneficial for your goals and needs. Call us today at (314) 361-9979.