Alternative Retirement
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Retirees in an earlier generation paid off their first mortgages and retired at the family home. The new retirees however are looking to benefit from their home equity to increase their retirement savings. Ways of utilizing their home equity includes transferring to a house or condominium unit smaller that what they were used to, transferring to a community with a lower cost of living and taking out a reverse mortgage. But prior to making this move: Consult your spouse if he/she is amenable to using your abode to help finance both of your retirement. If so, think if your plan is attainable like if you were to transfer to a smaller living space, can you both really make the sacrifice? Next, analyze the implication/s of transferring to another area in the country. Even if housing prices have increased significantly in the previous years, different variables may cause them to go down in the future. Home equity may help in cushioning the blow so to speak, but putting too much stock on your home equity to fund your retirement may not be a good idea. Putting your property on the market is a good idea if you have a significant home equity and if the transfer will not have a negative impact on your lifestyle. Your homework before you move is to check on the general housing costs in your preferred area. And for good measure, before transferring, it might be wise to try out life there and see if it suits your interests and way of life. Take note that the first $250,000 capital gains ($500,000 if you sell jointly with your spouse) when selling your home is not subject to federal taxation for as long as you stayed in the house for two years. Transferring to another area is not mandatory in reverse mortgage if you have a considerable home equity and want to stay in your existing home. However, reverse mortgage entails a lot of expensive fees that’s why it’s recommended only if you intend to stay in your home for the long haul.