As you near retirement, one of the biggest questions is whether you should sell or keep the family home. That is especially so if you fall among the 77% of Americans with retirement plans but not enough savings.
Sure, your family home is possibly your most valuable asset, and you’ve probably accumulated outstanding home equity as it’s only a few short years before retirement.
However, most financial planners don’t factor in the home’s equity when drafting a retirement income plan and determining if selling your house during retirement is a good idea. With good reason—you need a place to live. But that doesn’t mean it can’t feature in your retirement plans.
The Role of Your Home in Your Retirement Plans
There are four main ways to go about it:
A) Reverse mortgage
A reverse mortgage allows you to borrow against the home equity value without paying any loan payments. Your lender will recover their cash when you move out, sell the home, or die. The loan repayment value can never surpass the home’s value thanks to legislation. The downsides to a reverse mortgage are added costs, insurance charges, and a lowered equity.
B) Home equity loan
It works the same way as a conventional mortgage, which explains why it’s also known as a second mortgage. However, you don’t have to be 62 years old as you would for a reverse mortgage to acquire one.
C) Home equity line of credit (HELOC)
Works just like a credit card. You agree on the credit limit based on the home’s equity, which you can draw after fully repaying the loan. However, unlike a home equity loan, you only pay interest on the money you withdrew, not the entire amount.
Downgrading makes shrewd financial sense if you have a huge home and the kids left the nest. Considering it costs about 3.25% of a home’s value in maintenance each year, selling your $500,000 home to a more manageable $350,000 one will save you $4,875 per year.
Benefits of Downgrading Your Home
Yes, your home is full of fond family memories, but there are tangible benefits to selling your home during retirement:
1. Extra funds
If you have hefty equity or own a home entirely after paying off a mortgage but are short on savings, selling your house may give you the extra funds to enjoy life after employment.
2. Return on investment
Although financial experts argue otherwise, owning a home is expensive. As there are factors like insurance, property tax, inflation, and maintenance, downgrading keeps you liquid.
3. Improved liquidity and options
Most retirees rely on a pension, so it is uncommon for them to have large sums of liquid cash. Without reliable assets, maintaining a house can quickly eat through this money. However, you can re-invest the proceedings into liquid assets like stocks and bonds when you sell your home.
Selling the home grants you the freedom to rent a house anywhere. For instance, according to the U.S Department of State, over 70,000 Americans live in Costa Rica, and many are retirees.
Think tropical weather, sandy beaches, and sumptuous cuisine, all within a budget of $2,000-$3,000 a month. Selling your house can fund the retirement lifestyle you want.
Need Help Selling Your House During Retirement?
If the option of selling your house during retirement seems too daunting, you can reach out to us instead, and we would be happy to take on the task of selling your home. Call us at 860-368-0343 or fill in your details on our contact form. We’ll walk you through the process and explain how easy it is selling your house during retirement.
WE BUY HOUSES IN ANY SITUATION:
Behind on Payments
- Death of a loved one
- Liquidating assets
- Inherited property
- Job loss
- Bad mortgage
- Medical Bills
- Extensive repairs