Your home is filled with memories. It?s also filled with equity, and that could provide a source of retirement income. You may not have realized that your home is a potential source of income but the equity that you have in your home should be a part of your retirement financial plan.
Many financial advisers look at how much you have saved in retirement accounts and allocate part of those accounts to the stock market and the rest to fixed income investments. Homes are often thought as a liability in the traditional retirement planning framework. The expense of the home is accounted for but the value of the home is rarely considered.
Why home values should be considered in retirement planning
This is unfortunate for most retirees because some research conducted by financial planners found that a home can be the key to increased income and a less volatile portfolio. The research found that retirees should secure a reverse mortgage early in their retirement and use the reverse mortgage just as they would use funds generated from stocks or bonds. We would be happy to share this independent research with you or your financial planner.
Financial benefits of the reverse mortgage are not created based on aggressive assumptions or creative accounting. A retirement plan that includes a reverse mortgage simply recognizes that your home is an asset, and in many cases the family home is the largest asset a family has.
In the past, homes have been illiquid, meaning it was difficult to access the cash value of this investment. You had to sell or refinance with a traditional mortgage and a traditional mortgage required you to have a regular monthly income and accept an additional monthly bill. Adding a payment to your retirement budget was rarely a way to relieve financial stress.
With a reverse mortgage, the value of your home is considered when determining how much retirement income your investments can generate.
The reverse mortgage adds liquidity to your financial situation by making your home into a liquid asset, easily accessible for cash. No monthly payments are required since the reverse mortgage is fully paid off when you leave your home.
Your home could be the most important part of your retirement plan and it is not necessarily a liability. A reverse mortgage could turn your home into a valuable source of retirement income and unlock financial security in addition to providing you with a comfortable place to enjoy your retirement.
Leo is an avid patroller of the mortgage, reverse mortgage, and retirement industry! Leo enjoys keeping up to date and reporting on important issues that are in the news. He also likes educating people on how both the traditional and reverse mortgage industry works
Leo Franklin
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