Are you thinking about retiring? If you’re worried about your financial future in retirement, a reverse mortgage or downsizing to a smaller home are options you may want to consider.
A recent study cited by the Wall Street Journal from the Center for Retirement Research at Boston College said that roughly 50% of households will not be able to maintain their standard of living in retirement and “the only real solutions are to save more and/or work longer.” While very different, both a reverse mortgage and the downsizing of your primary residence to one that is more affordable are options that could provide you with a greater financial cushion as you enter retirement.
There are multiple factors behind why people consider downsizing their home as they think about entering into retirement. One frequently given reason is simply to save on overall cost and maintenance needs. For people who raised families in suburban homes that include large yards, extra bedrooms or swimming pools, the maintenance needs of their existing residence can outweigh its benefits later in life. Large homes take both physical and financial effort to maintain, which many retirees may not want to deal with as they enter into their golden years. In addition, the purchase of a home should be considered an investment and the selling of a home you’ve owned for a number of years can give you access to the equity resources you’ve built during the course of your mortgage.
This line of thinking has led many soon-to-be retirees to consider moving to what are referred to as “active adult communities”. These communities typically offer great amenities and social conveniences, but also lack maintenance needs that come with maintaining a larger property.
For many though, selling a home they’ve invested so much in over the years is simply out of the question. The owners may not be able to fathom moving out of the local community or their home acts as a gathering place for family members during the weekend. Regardless of the reason, some people simply don’t want to sell their home, but their fixed income in retirement can leave them in a very tight financial bind. For these people, a reverse mortgage may be the best solution.
In essence, a reverse mortgage allows seniors the ability to borrow against the equity they’ve accrued in their home over the years. These mortgages can provide an extra financial boost to seniors by helping them take advantage of their home’s equity for things such as remodels, repairs or healthcare costs.
At HomeBridge, we offer the FHA’s Home Equity Conversion Mortgage, or HECM for short. To qualify for an HECM, the borrower must be at least 62 years old, own their home or have paid-down a significant amount of their mortgage, in addition to attending an educational session with a HUD-approved counselor.
Multiple factors determine the amount that you can qualify for with a reverse mortgage, including your age, the value of your home and the current interest rates. As everyone’s financial and personal situations are different, it’s best to consult with your financial advisor and speak with a trusted mortgage lender for a free consultation to make sure you’re making the right decision for your own personal wellbeing.
Do you any have questions on reverse mortgages or any other type of mortgage product? Just give us a call or send us an e-mail and we’re happy to help. Remember, a consultation with a mortgage professional is always free!