Are you planning to retire? It is likely that you think that you have sufficient savings to maintain your lifestyle. However, you might be worried about your ability to deal with certain unexpected expenses, like medical expenses. On the other hand, you simply do not have enough in savings to retire with the peace of mind you need. Using your home equity for to fund your retirement is one way great way to help secure your financial post-career stability; that being said, liquidating that wealth is not as easy as withdrawing cash from an ATM. But don’t worry, we will tell you how you can turn your home equity into a stable retirement income.
1. Downsize and Invest the Money
Sell your home once you quit working and purchase something more affordable and smaller. You can take your gains from your home sale and invest these funds to provide a stable income stream. Perhaps you will find a home in a retirement community, or purchase a place closer to your family.
The great thing is that a smaller place is often less expensive to maintain. Also, property taxes can be much lower on a less expensive home. This is because they’re often based on a certain percentage of the net value of a property. And that is not all as cooling or heating a smaller home can be cheaper, too.
2. Consider a Reverse Mortgage
This is another great option. Reverse mortgages are designed for allowing older homeowners to age in place while using home equity. A reverse mortgage will convert your home equity into cash and allow you to continue living in your house. Basically, you are selling your home equity to a bank bit by bit. When used right, a reverse mortgage provides the best of both worlds. There are various types of reverse mortgages available from a number of lenders. That being said, it is vital to remember that the Home Equity Conversion Mortgage (HECM) is the sole reverse mortgage which is insured by the U.S. Federal Government.
3. Rent Out Space
In case you love your neighborhood and do not want to downsize, then you can stay in your home and rent out your basement or a room. A smart move is to rent out a room to a graduate student or even a medical resident who is quiet, composed, and focused on their studies. You can leverage technology to expand your reach easily. VRBO and Airbnb are excellent platforms for short-term rentals. This will let you list a room in the home, so you can easily make money without any hassle. On the other hand, if you are looking for a long-term solution, try something like SilverNest, a website for seniors who are looking to share their space.
4. Refinance Your Mortgage
In case you have not completely paid off your house yet, and you are still carrying an old mortgage from several years ago when the interest rate was 7-8% or higher, then refinancing your mortgage can be a smart way for accessing some of your home equity.
Many retirees tend to underestimate the importance of home equity when it comes to retirement. However, you worked for several decades to pay off your home. Now is the right time to leverage that equity to enjoy a more stable and comfortable retirement.