PREPARING FOR RETIREMENT BY OWNING A HOME MAY HELP
There was a time when nobody had doubts about the value of owning a home. It was considered an incredible long-term investment and ideal preparation for retirement. Today we know that real estate isn't as safe as we once thought it was, at least as a short-term investment, and Americans, young and old, are leery of sinking their life savings into a home as an investment. Knowing this, will owning a home help you retire? That depends on a number of factors, including when you purchase the home.
If you buy the home in advance of retirement, when you have the time to build equity, then yes, this may help you prepare for retirement by owning a home. If you are thinking of buying your first home in retirement, there could be problems.
Ideally, preparing for retirement by owning a home may help to help you financially during retirement is one that will be paid off by the time you bring in the shingle. Unfortunately, that doesn't happen for many homeowners.
That's OK, though, according to Sydney Lagier, former certified public accountant. "With interest rates so low right now," she says, "a mortgage can be an excellent hedge against inflation."
"A mortgage enables you to lock in today's home price, but pay for it with tomorrow's inflated dollars," Lagier claims.
If inflation is a concern, Lagier suggests taking the money that you would have used to pay off the mortgage prior to retirement and investing it in Treasury Inflation-Protected Securities.
Reverse Mortgage:
This loan allows persons over 62 to release equity in their primary residence without having to sell or move affording retired homeowners or those on fixed incomes to utilize equity for supplemental income
.• Loans up to 80% of the property’s appraised value (depending on the age of youngest borrower)
• Proceeds are distributed in lump sum, monthly or credit line, or a contribution.
• Owner has right to continue living in the house for life (or until no longer able to do so)
• When property vacated for 12 months, repayment is triggered
• Property may be sold to repay loan or lender may allow heirs to refinance
Benefits:
• Allows someone to stay in their home
• Provides for greater monthly income
• The senior avoids paying tax on the sale amount of the home that they might otherwise pay
• There is no monthly payment to make
• Heirs would get the balance of the equity in the home
Terms:
• Borrowers must be 62
• House must be owner occupied and primary residence
• Owned free and clear (or with existing mortgage that can be paid off with proceeds)
• Interest is charged only on funds used
• Funds are not taxable income.
More information visit www.reversemortgage.org
Income Property
Many experts claim that the purchase of income property is a far better retirement investment than depending on being able to tap into your primary home's equity. This investment property could even be your retirement home, rented out until you stop working.
The best time to buy this home is at least five to 10 years before you retire, according to Michele Lerner in an Associated Press article. She also cautions about the risks you take in losing liquidity when you tie up your money in a second home.
The ideal candidate for this scenario is one who has built up an emergency cushion of at least one year's worth of expenses – both current expenses and those they'll take on with a second property.
Don't disregard other risks, such as the maintenance costs for two homes. Appliance and major system failures can be costly to remedy, and if you lack liquidity, they could be catastrophic.
Click to search for income properties
Rent or Buy?
Whether to purchase or rent a home is a common question when folks near retirement. Since rents are rising 5 to 6 percent a year on average, and interest rates are still incredibly low, it appears on the surface that buying is a better option. Dig a little deeper, and it is even more apparent.
With a fixed-rate mortgage your monthly house payment won't change over the life of the loan. Rent? At least once a year or whenever the lease is up for renewal, you'll face a possible rent hike.
Whether or not owning a home will help you retire depends on variables such as your current financial situation, your investment portfolio, and how many years you plan on working. A good financial planner is your best source of information.
Provided courtesy from SANDRA DEVARGAS Real Estate Salesperon and The DeVaargas Team at
Keller Williams Realty Buffalo Northtowns
4955 N. Bailey Ave, Amherst NY 14226
Call or Text 716-316-1629 for information on Buyer’s Representation Services (NO COST TO HOMEBUYERS)
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