You Have Cared for Your Home, Now Let it Care for You
If you’re like most Americans approaching retirement, you’ve worked for decades with your end goal in mind. Most likely, you’ve carefully set aside savings for the future (or at least you’ve tried to), whether you have invested it conservatively or more liberally. But with costs of health care rising and the average lifespan increasing with it, your income may not have enabled you to save quite enough.
Your kids, now adults themselves, may or may not be in a position to help care for you. Perhaps they live in another state, or are busy raising their own children.
You’ve seen investments come and go. Cars that have lost value over time, short-term investments that haven’t outperformed the market as hoped.
But you probably do have one very important asset to help propel you through retirement: your home.
While the real estate market recently tumbled, most markets have experienced a substantial, if not full recovery since the market crash in 2007. Unlike your children, or your investments or your cars, your home is ready, willing and able to help you fund your retirement.
Your home and your retirement
What’s the biggest purchase you’ve ever made? If you’re like most people, the item you own with the single largest price tag is most likely your home. In fact, the homeownership rate in the United States is around 64% as of 2014, according to the U.S. Census. Millions of Americans own their homes.
If you are one of them, your home may also be your most valuable asset. According to a recent Brookings Institution report, home equity is a very important source of net worth to all but the wealthiest households near retirement age.
So you’ve spent years—maybe decades—caring for your home. Why not now sit back and let it care for you?
“Home equity is an important source of wealth for middle income households, accounting for more than one-third of total net worth for the second, third, and fourth quintiles of the net worth distribution,” the Brookings report found. “However, housing wealth is not a liquid asset, and homeowners rarely access home equity during retirement through financial products such as reverse mortgages or home equity lines of credit.”
A home equity loan is one option, but a reverse mortgage may be the most direct way for you to tap into this valuable retirement option.
A reverse mortgage: Let your home take care of you
A reverse mortgage allows a qualifying borrower to tap into his or her home equity via a lump sum, term or tenure payments, or as a line of credit.
If you have maintained your home over time, you’ve likely helped it retain—and perhaps gain—value. A borrower’s reverse mortgage loan amount is based on the appraised value of the home as well as the age of the primary borrower, the age of his or her spouse, and current interest rates.
Use a reverse mortgage calculator to determine how much of your home equity you may be able to borrow.
The borrower is still responsible for ongoing property taxes, homeowners insurance and upkeep of the home.
As long as that borrower meets those requirements, he or she will never have to repay more than the home is worth when the time comes to repay the loan. For many, a reverse mortgage offers some financial freedom and flexibility, whether to help pay for ongoing health care costs such as in-home care, or simply as a standby fund to draw on should other investments not pan out as planned.
Contact a reverse mortgage professional to learn more about how your home can care for you in retirement.