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Four Ways Your Home Can Help You Retire Comfortably

According to the Center for Retirement Research at Boston College, the latest study in 2013

found that “a typical working household approaching retirement with a 401(k) had only $111,000

in combined 401(k) and IRA balances…that’s enough to yield an income of about $400 a

month.”  Even if you combine that with social security, it still doesn’t leave retirees with much in

the way of disposable income. That puts many Americans in a tough spot as they face

retirement, but don’t have enough savings to sustain a comfortable lifestyle. While home

ownership has often been considered the pinnacle of the American dream, those who retire

without a savings plan may want to look at their home in a new light. Your home is an asset,

and while the goal has always been paying off your home, you may be able to use your home to

supplement your retirement income.

Here are four ways that your home may be able to help you retire a little easier:

1. Renting or sharing your home. Renting out a room is a good way to generate a little

extra cash and help offset some of your expenses. Another option is to invite a friend or

family member to live with you to help share in the expenses.

2. Downsizing. You can sell your home if you have enough equity and purchase a smaller,

less expensive home. Save the funds from the proceeds to supplement your income or

use them to pay off your debt and lower your expenses.

3. Borrow against your home. If you plan to continue to work and have considerable equity

in your home, you may be able to take out a mortgage or a line of credit. This can

provide you with a cushion at a low interest rate.

4. Reverse mortgage loans. Reverse mortgages are a way for seniors to access a portion

of their home’s equity to obtain tax free money without having to pay a monthly

mortgage payment. The home owner must live in that home as their primary residence.

How viable is this option? In a book called “Falling Short: The Coming Retirement Crisis

and What to Do About It,” authors Charles D. Ellis, an investment consultant, and Alicia

H. Munnell and Andrew D. Eschtruth of the Center for Retirement Research at Boston

College, suggest reverse mortgages as an option for seniors that don’t have the funds to

retire. A no cost evaluation can be done to determine if this is a good option for you.

If you would like to learn more about reverse mortgages or to see if you’re eligible, call Vince

Halek at 231-313-1800

Reverse Mortgage for Purchase – Scenarios

Below are just of few hypothetical scenarios illustrating the power of using a reverse mortgage to purchase a home in different circumstances.  These scenarios are only examples, and your circumstances may be different, however a reverse mortgage for purchase could help you achieve your retirement home purchasing objectives.

Scenario 1

  • Mr. and Mrs. Smith wish to downsize
  • They sell their current home for $400,000 and pay off their mortgage of $250,000 – leaving $150,000 cash leftover
  • Some possible options for Mr. and Mrs. Smith when buying their next home:
    • They can buy a $150,000 home for cash and have no monthly mortgage payments
    • They can buy a $250,000 home, put $150,000 down and take a traditional forward mortgage for $100,000 with monthly payments.
    • They can buy a $250,000 home, put $120,000 down, take a HECM reverse mortgage for $130,000, and have no monthly mortgage payments for as long as they live in the home – AND keep $30,000 in cash in their bank account.
    • They can buy a $280,000 home, put $150,000 down, take a HECM reverse mortgage for $130,000, and have no monthly mortgage payments as long as they live in the home.

Scenario 2

  • Ms. Jones wishes to relocate into a similar home in a new state or retirement location that is higher priced.
  • She sells her current free and clear home for $200,000, but similar homes in the new state or retirement location run $300,000 – $350,000.
  • Some possible options for Ms. Jones when buying her next home:
    • She can buy a $300,000 home for cash by using the proceeds of their sale and $100,000 cash from savings and have no monthly mortgage payments.
    • She can buy a $300,000 home, put $200,000 down, and take a traditional forward mortgage for $100,000 with monthly payments.
    • She can buy a $300,000 home, put $145,000 down, take a HECM reverse mortgage for $155,000, and have no monthly mortgage payments for as long as she lives in the home – AND keeps $55,000 in cash in their bank account.
    • She can buy a $400,000 home, put $200,000 down, take a HECM reverse mortgage for $200,000, and have no monthly mortgage payments for as long as she lives in the home.

Scenario 3

  • Mr. and Mrs. Johnson wish to purchase a second property such as a vacation home with the intention of eventually retiring, selling their primary home, and moving into the vacation home.
  • Their primary home is free and clear and worth $400,000.
  • Some possible options for Mr. and Mrs. Johnson when buying their vacation home:
    • They can buy a $250,000 home for cash by using cash from savings – no mortgage payments.
    • They can buy a $250,000 home, put $150,000 down out of savings, and take a traditional forward mortgage for $100,000 with monthly payments.
    • They can buy a $250,000 home for cash by using a HECM reverse mortgage to pull $200,000 from their current home and adding $50,000 from their savings.
    • They can buy a $350,000 home, put $150,000 down, and use a HECM reverse mortgage to finance $200,000 from their current home to cover the remainder – No monthly mortgage payments for life.
  • With the last two options, when the primary home is later sold, the proceeds can be put into savings or used to pay down the reverse mortgage balance.