Like many Americans in retirement, you may find yourself wondering about the best financial course to take and how to best use the money and assets you have worked to build over time.
For many baby boomers, the home is the largest asset they have. You probably have built up your equity over the years and you may even own your home free and clear.
Do you wish to stay in your home?
This is the most important question to ask yourself if you are thinking about getting a reverse mortgage versus putting your house on the market. If you don’t plan to stay in your home—or if you don’t plan to be there for the long term—a reverse mortgage may not be the right option.
If, like the vast majority of Americans, you do wish to remain in your home while you age, then this type of loan—designed expressly for the purpose of aging in place—is an option to consider.
How much is your home worth?
In order to qualify for a reverse mortgage, you must be at least 62 years of age and you must have a substantial amount of home equity. In order to get a reverse mortgage, all existing loans on the home must be paid off. Borrowers are able to use loan proceeds to pay off the existing mortgage and then can receive any remaining proceeds through a lump sum, term or tenure payments, or as a line of credit.
Selling may be an option for you, but the recent housing crash has left many homeowners with a lot less in home value than they had five years ago. Getting a reverse mortgage with the potential to increase cash flow could be a viable alternative to selling at a loss.
How equipped is your home for your needs?
A borrower is allowed to use reverse mortgage proceeds however he or she so chooses. One way some borrowers choose to use their proceeds is to make home improvements or modifications so that the home is better suited for aging in place.
Some changes to consider may be:
- Wheelchair accessible ramps or chair lifts
- Wider door frames
- Adding additional lighting
- Living quarters on the main floor
- Door pulls and handrails for easier access
Changing your home to meet your standards of living through a reverse mortgage could allow you to remain in the home where you live rather than moving into a new residence.
Deciding where to live in retirement and whether you will move away from the home where your family has lived for years is a major decision, as is taking out a loan to help you meet your financial needs in retirement.