When you buy your home, you are not only getting a place to live, but an investment and a way to supplement your income in retirement. It may seem early to think about something like this if you are just buying a home, but the sooner you begin thinking about retirement, the morel likely that you will have enough. However, for your home equity to be a useful part of your retirement plan, you will want to make sure that you do not use it for general purposes and wait until you are no longer working.
Tapping Into Your Equity
One way to rely on equity in retirement is to use a reverse mortgage. These are loans that do not have to be repaid until either the owner dies or sells their home. One of the greatest advantages is that the home owner is allowed to remain in the home. The loan is then paid with the proceeds of the home sale. This is ideal for retirees who do not intend to leave behind as large of an inheritance. You can receive your payment in a lump sum or can receive regular payments. It is also possible to get a reverse mortgage line of credit that will only be tapped when your savings are depleted. Another option is to have your living expenses covered by dividends paid out by your investments with the reverse mortgage only triggering when the stock market is depressed.
The Disadvantages Of Home Equity Loans
The downside of a reverse mortgage is that the interest rates can be somewhat high. The plan may force you to stay in your home because the lost equity may make it difficult to purchase a smaller property or enter into an assisted living facility. Under these circumstances, it may make sense to sell your home and move into a more affordable home. Whatever is left over can be used to fund your retirement.
When To Tap Into Home Equity
There are a few things that it may make sense to use a home equity loan for, such as making improvements to your home, especially when the increase in your home equity will be expected to be higher than the cost of the loan. It may also make sense to use a home equity loan to cover unexpected expenses or an emergency. But otherwise, you should save your home equity for when you may need it during your retirement.
To learn more, contact a company like Clear Creek Rentals LTD.