How Homeownership Can Help with Retirement
Information
accurate as of
March 5, 2020
in Blog

How Homeownership Can Help with Retirement

As baby boomers enter retirement, they may have questions as they plan for their futures: Will I stay in my current home? Should I downsize?  Can I age in place?  A recent report released by the National Reverse Mortgage Lenders Association shows that seniors are sitting on a record amount of housing wealth at $7.19 trillion.

While utilizing one’s home equity hasn’t been a traditional way of planning for retirement, it’s worth exploring how it can be a source of income to help with retirement.

A study from the Center for Retirement Research at Boston College paints a distinct picture that most households do not change residences, even over several decades. This stability shows up in two ways. Households either stay in the home they were in during their 50s, or they buy a new home around retirement, where they generally remain for the duration.

The findings show that most people will want to age in place unless there’s a major life event that causes them to move.  This leads to the conclusion that homeowners have enough residential stability that makes tapping into their home’s equity a viable strategy.2

A reverse mortgage allows qualified homeowners, who are 62 or older, access to a portion of their home equity as cash which can be used to supplement their retirement income.  Reverse mortgage borrowers do not have to repay the loan as long as they live in the home as their primary residence, pay property taxes and insurance, and maintain the property.3 

Borrowers can receive the available equity from their reverse mortgage as a lump sum4, monthly installments, or a line of credit.5 The lump-sum payment can be a good option if you want to pay down other debts or make improvements to your home.  Receiving monthly installments can help cover ongoing expenses and alleviate stress over monthly cash flow. A line of credit may be a good option for an emergency fund because it is available anytime you need it. An added benefit of the line of credit is that if your home value increases over time, so will the amount available to you.6

Do you think your home has sufficient equity to help supplement your retirement?  Call (800) 976-6211 to speak with a licensed reverse mortgage specialist to find out how much you may qualify for.

1 https://www.nrmlaonline.org/2019/06/25/senior-housing-wealth-reaches-record-7-14-trillion

2 https://crr.bc.edu/wp-content/uploads/2020/01/IB_20-3.pdf

3 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.

4 Only available on fixed rate reverse mortgage.

5 The funds available to the borrower may be restricted for the first 12 months after loan closing, due to HECM reverse mortgage requirements.  In addition, the borrower may need to set aside additional funds from the loan proceeds to pay for taxes and insurance.

6 The reverse mortgage loan balance grows at the same rate as the available line of credit. Line of credit growth occurs and is only a benefit when a portion of the line of credit is not used. The unused line of credit grows over time and more funds become available during the life of the loan.