• Question
  • Lower house payments

    Asked by a 69 year old man from Strongsville, OH on 8/5/2012

    Lower house payments

  • Categories: Housing, Tapping home equity


  • Editorial 


    San Francisco, CA

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  • There are three ways you may be able to lower your house payments for retirement.

    Downsizing is selling your existing home and moving to a less expensive residence.

    Advantages of Downsizing:
    -- Downsizing generates efficient cash out of all the equity you have accumulated to date – without additional interest to be paid or debt. Downsizing is widely considered the most efficient way to get money out of your home.
    -- Downsizing represents an opportunity to potentially eliminate or reduce mortgage debt.
    -- Many seniors find that a smaller residence or a home in a community more suited to senior living is much better suited to them than their traditional home.
    -- Maintenance costs will be lowered with a less expensive residence.
    -- There may be significant tax advantages to downsizing.
    -- The equity in the smaller residence can still be tapped with a Reverse Mortgage or other product.

    Disadvantages of Downsizing
    -- Emotional attachment to family home and community. Many seniors wish to stay where they have always lived.
    -- There are significant costs – both real and emotional -- involved with selling a home and moving.

    Interest rates are at record lows and many homeowners can significantly reduce monthly payments through refinancing.

    Advantages of Refiniancing:
    -- You can stay in your home.
    -- You can still benefit from the appreciation of your home’s value.
    -- You may be able to deduct the interest paid on the mortgage from your taxes.
    -- Transaction/closing costs can be very low.

    Disadvantages of Home Equity Loans
    -- Not everyone is eligible for Home Equity Loans since there are income and credit rating requirements for repaying the additional debt
    -- The homeowner must continue to pay the costs of home maintenance such as property taxes and homeowners’ insurance.
    -- Regular payments must be made, increasing the potential risk of foreclosure.
    -- If you consider securing a home equity loan with your refinancing, you must be careful not to borrow more than the ultimate value of their home. This can be tricky to estimate in a stagnant or declining housing market.

    A Reverse Mortgage is a special kind of loan – available to seniors ages 62 and above. What makes a Reverse Mortgage different from a home equity loan is that you do not pay the money back until you die, sell or permanently move out of your home. Depending on many different factors, a 70 year old homeowner of a home valued at $500,000 (with no existing mortgage) could receive as much as $250,000 in cash. This sum would be repaid when the house is sold, and the amount owed will never exceed the value of the house.

    Advantages of Reverse Mortgages
    -- You get to stay in your home and retain ownership of the property.
    -- Substantial equity can be taken out, depending on your age, home value and current interest rates.
    -- The interest rates tend to be lower than those on forward mortgages or home equity loans.
    -- There are potential tax benefits to a Reverse Mortgage.
    -- There are no payments while you are living in the home.
    -- While interest accumulates, it is not due until you leave or sell the home.
    -- You will never owe more than the value of the home.

    Disadvantages of Reverse Mortgages
    -- Interest accumulates on amount you borrow. (Though you will never owe more than the value of your home.)
    -- Upfront costs on a Reverse Mortgage are considered high, higher than mortgage refinancing.
    -- The interest ultimately paid on the loan amount may be higher than that charged in a Home Equity Loan
    -- The homeowner must continue to pay the costs of home maintenance, such as property taxes and homeowners’ insurance.
    -- The product is complex, and requires the homeowner to undergo counseling to ensure that they understand it.

    Estimate your Reverse Mortgage Loan Amount here:

  • Login to rate this answer:   Answered on 8/6/2012
  • Editorial 


    San Francisco, CA

    Get a FREE phone consultation
    with an advisor. Learn more...
  • Links to help you compare your options for lowering house payments:

    Estimate Your Reverse Mortgage loan amount:
    ----> https://www.newretirement.com/Services/Reverse_Mortgage_Calculator.aspx

    Find and Compare Prescreened Reverse Mortgage Lenders:
    ----> https://www.newretirement.com/reverse-mortgage-marketplace.aspx

    Compare Rates and Options for Refinancing:
    ----> http://www.newretirement.com/Services/Mortgage_Refinancing_Calculator.aspx

  • Login to rate this answer:   Answered on 8/6/2012
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.