If you are like many older homeowners, your home is your single largest asset. In fact, it may be more valuable than all of your other assets combined.
So, you now must wonder, with all that has occurred with our economy and, most specifically with house values, can you still count on your home to “finance” a reasonable portion of your retirement?
Here are my thoughts on that question. Your home is probably still your most valuable asset. While its value has fallen, I suspect that the rest of your investment portfolio is off the highs of 2005 as well.
Since your home is, no doubt, your most valuable asset, I believe that integrating that asset into your overall retirement plan is smart and, for many, probably necessary.
Once you have paid off or substantially paid down your mortgage, you will own a very valuable asset. More importantly, you will have given yourself the gift of having options. Option one is to sell, invest the proceeds, and live off the proceeds for the remainder of your life. Keep in mind that sales costs, like real estate commissions, miscellaneous selling costs, and title insurance could consume up to ten percent of the sales price of your home. This still may be the best option if you intend to downsize.
Combining that strategy with the new Reverse Mortgage for Purchase program could be an excellent choice for those seeking to downsize or relocate. Be sure to consult with a reverse mortgage professional to get full details on the new reverse mortgage purchase program.
Option two is the reverse mortgage strategy on your current home. Money from a reverse mortgage can be used to payoff your current mortgage, eliminate debt, and to provide a monthly income you cannot outlive. As long as you are alive and continue to live in your home, a reverse mortgage does not need to be repaid.
You will be required to maintain your home and continue to pay your property taxes and insurance.
Reverse mortgages are more expensive than traditional real estate loans but all the costs can be financed as part of the reverse mortgage. Using your home as part of your retirement plan, I believe, makes sense in the volatile and difficult to predict financial climate in which we now live. However, a reverse mortgage should represent only a portion of your income in retirement. A reverse mortgage is a supplement to, not a replacement for, a reasonable portfolio of tax deferred and taxable investments.
For more information and to design a strategy to meet your specific needs and objectives, consult a financial and reverse mortgage expert.
