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BC Center for Retirement Research: Boost Retirement Income by Purchasing Lower Cost Home

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Standard - by - November 4, 2014 - No Comments

With the cost of living increases, shrinking pensions, and increasing lifespans,  many retirees would like additional help in funding their retirement.  A new study by the Center for Retirement Research has released a booklet outlining ways retirement savers can use their home equity to receive peace of mind and additional retirement income.   Before making any decisions we recommend you consult with a Realtor and Financial Professional on what you would sell your home for and how you can maximize your return on any moneys received.  Here are a few options:

One option is to purchase a less expensive home and use the difference to help fund your retirement.  You may  no longer need the large home that you raised your kids in.   If the home and yard maintenance is not a problem now, it very well could be in the future.  You may also want to look into getting a single story home in lieu of a two story home because it may be difficult to climb stairs in the future.  Not only will this strategy get you cash in hand, but you should have lower property taxes, home maintenance, and less money spent on insurance.  For example, if you currently live in a home worth $500,000 with no mortgage, and sell it to purchase a $250,000 home for cash, you will be left with around $220,000(after $30,000 in closing costs) to extend and improve your retirement.

Another options is to use this same scenario but purchase the home using a Reverse Mortgage.  You are 75 years old and  sell your home for $500,000 and purchase the new home for $250,000 but the Reverse Mortgage would only requires you to put down $107,000 leaving you $363,000(after $30,000 closing costs on the sale of your home) to put towards your retirement.  Buying your home with a Reverse Mortgage gives you  an actual Net Gain of $143,000.00!

The Center for Retirement Research suggests another option is to keep your current home and do a Reverse Mortgage.  Given this same example, you are 75 years old and your home is worth $500,000 with no mortgage.  A Reverse Mortgage would provide the following options: 1. A fixed rate and a one time payout of almost $180,000.00 2. An annually fixed rate and an FHA Guaranteed Credit-line of over $296,000.00 3. An annually fixed rate and an FHA Guaranteed monthly payout for the Life of both homeowners of $1,950/month.

With the ever increasing costs of living and shrinking returns on your savings, many are finding downsizing their cost of living and/or a Reverse Mortgage will give them the peace of mind they are seeking in retirement.  With home values back up now may be the best time to take advantage of these strategies.  If you are in a situation where you may run out of money in retirement, making an adjustment early on can protect thousands of dollars towards your future.  Find out what a Reverse Mortgage will do for you by anonymously checking our Reverse Mortgage Calculators.

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