Your home is your biggest asset; here are some ways to use it to fund your retirement years.
To most Americans, their home is their biggest investment, and they’ve spent 30 years paying for it. If you’re thinking about downsizing as you near retirement and own your home, here are some tips to use that to your advantage as you plan your retirement goals.
First of all, decide what lifestyle you want to live when you retire. If you plan to stay in your home for a decade or two but are worried about repairs or being able to afford the expenses, you might consider a reverse mortgage. This is basically an equity loan which doesn’t have to be repaid until you move out of the home, sell it, or pass away, and can ease the financial burden if you’re having a hard time making ends meet or perhaps need major renovations on your home.
A home equity line of credit may be viable, but remember you have to repay the loan in monthly installments. This option will only work if you have enough income to cover the added expense, so it depends on whether you have the cash flow to cover future payments.
Selling your home outright may make the most sense, especially if you plan to travel a lot or want to live in a warmer climate during the winter and a mild climate in summer. Usually, seniors find themselves in an empty nest that’s too big to maintain, and spend their spare time cleaning or repairing a house that they’ve outgrown. Many “snowbirds” sell their family home in order to purchase two smaller residences so they can have the best of both worlds; others choose to move to an assisted living community so they can enjoy the amenities of a retirement lifestyle without worrying about home repairs or housecleaning.
If you’re considering a move to an assisted living community but aren’t sure it’s what you want in the long term, you might consider renting your home. In this case, often the best plan is to hire a property management company to take care of all the details. A property management company will advertise the home, do credit checks and contract details with the renter, collect monies, and oversee repairs and evictions if they occur.
Whatever route you’re considering, it’s a good idea to gather your financial paperwork and visit an attorney or retirement counselor who specializes in estate planning. They will be able to analyze your income and investments as well as your projected social security benefits and home value, and help you plan the long-term retirement you’ve been waiting decades to begin!