Choose a mortgage designed for your stage of life, one that makes retirement easy. Face economic uncertainty with piece of mind and improve your monthly cash flow immediately by eliminating your existing mortgage payment. Home values may fluctuate over time but your Reverse mortgage terms will not change.
How to use Home Equity to Empower Retirement:
When you make the decision to retire you’ll need to calculate how much income you will need to maintain your lifestyle. Social Security and retirement investments such as a 401(k) or IRA’s are a good place to start, but the equity in your home is likely your largest asset and often overlooked as a source of retirement income.
What Is Home Equity?
Home equity is the difference between the balance on your mortgage and your home’s current market value. For example, if you owe $300,000 on your mortgage and your property is worth $1,300,000 you have $1,000,000 in home equity.
The amount of equity you have in your home will fluctuate with changes in your local real estate market. A real estate appraiser can provide you with a valuation based on recent home sales in your area, but it will cost you. As an alternative you can give us a call and one of our experienced team members will review recent sales in your neighborhood and provide an estimate of your home’s value.
How to turn the equity in your home into cash:
Once you’ve got an idea how much equity you have there are several ways to turn it into cash.
- Home equity loan or line of credit (HELOC). A home equity loan typically offers a fixed amount of credit at a fixed interest rate that you repay over a set period of time, typically 15 years. A home equity line of credit (HELOC) is a revolving line of credit that can be drawn against when needed. Similar to a credit card, you make payments on the amount you borrow and the loan typically has a 10 year draw period. Qualifying for a new loan typically involves an evaluation of your income, credit and an appraisal.
- Cash-out refinance. Another option is to pull equity from your home by doing a cash-out refinance. In this case you simply refinance your existing mortgage for more than its current balance, taking the difference in cash. Qualifying for this new loan typically involves an evaluation of your income, credit and an appraisal.
- Reverse mortgage. If the homeowner is 55* years or older, another option for tapping into the equity in your home is a Reverse mortgage. With a reverse mortgage the lender eliminates the existing mortgage payment and may make payments to the borrower, the reverse of a traditional mortgage. The homeowner isn’t required to pay back the loan as long as the home remains their primary residence. The borrower will need to abide by the loan terms such as paying property taxes, home owners insurance and maintaining the home. If the homeowner fails to meet these and other loan obligations the loan will need to be repaid.
- Downsizing. Of course you may decide that your current home is too large for your retirement lifestyle or that you no longer need to live in an expensive area. You might choose to sell your home and buy a smaller, less expensive home in a more cost-effective State. This would allow you to keep some of the equity you have built but there may be tax consequences, consult with your tax professional.
*For certain Reverse mortgage products only, excluding Massachusetts, New York, and Washington, where the minimum age is 60, and North Carolina, Texas, and Utah, where the minimum age is 62.
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