Your home is one of the most valuable (if not the most valuable) asset you’ll have in your life. Due to its high value, home equity can become a funding aspect of your retirement plan should you choose to do so. Home equity is a great supplement on top of what you’ve already been saving for decades, and we’re here to talk about the few ways you can make it happen.
How can I turn my home equity into retirement income?
Sell your home
We know what you’re thinking — this seems a bit drastic! However, selling your home and moving can free up some cash to use for your retirement fund. Consider moving in with friends or family members. This can expand your retirement dollars, as the amount you receive could be enough to cover some of the mortgage.
Downsize to another space
If you have more space than you need, you might want to consider downsizing. Moving into an apartment or condo is a good option if you feel like you have too many rooms in your house currently. Not only is it less expensive, but it’s less space to maintain. You’ll also save money on property taxes and utilities, depending on the place. Downsizing also gives you the opportunity to sell a lot of belongings, which can provide some quick cash.
Invest in a property
Purchasing an investment property can improve cash flow and provide some extra income. Refinancing your mortgage allows you to tap into your home equity and reduce your interest rate. However, you might not qualify for a lower interest rate, so don’t go assuming you will. You’ll also have to pay closing costs again, which can add up quickly. If you choose not to refinance, you could also get a home equity line of credit (HELOC). Closing costs will be cheaper and you can get a lower repayment term.
Rent out your space
If you have some spare bedrooms in your home, renting them out can be a huge cost saver. This way you’ll earn income without having to buy another property, you’ll be able to cover a substantial amount of your mortgage if it’s relatively low. While this is a money saver in the long run, don’t forget about the maintenance and decor that comes with it.
Reverse your mortgage
Getting a reverse mortgage is another way to put your home equity towards retirement. If you’re 62 and older, you could qualify to borrow against your home’s equity. On top of that, you won’t have to repay the money until you move, pass away, or leave the home for other reasons. Reverse mortgages don’t affect Social Security or Medicare benefits either. However, even though you won’t be making monthly payments, you’ll still be paying for insurance and property taxes. And there could be higher closing costs associated with reverse mortgages.
Need help understanding how you can use home equity to your advantage? Ken Venick is your guy! He’s been in the mortgage business for over 30 years, and can put you or your client in the right position for their needs. Visit our FAQ page for more info, and contact us today.