Your home is one of the biggest investments you can make. You put forth the tireless effort, funds, and have worked hard to make something you can be proud of. You likely put the same hard work into your retirement nest egg, too. But some retirees consider these two things co-dependent.
To prepare for retirement, some homeowners sell their house for a little extra money or perhaps have plans to move. Whatever your plans for retirement may be, now is the time to cash in.
If it’s time to save for your retirement and you are using your house to help pay for it, there are two ways. Many retirees make the decision to sell their home while some put a reverse mortgage on their house and occupy it. Both of these are reasonable choices; there are some key factors you should consider.
Funding Your Retirement with a Reverse Mortgage? Here’s What You Need to Know
Here’s how a reverse mortgage works: Lenders will make payments to you based off a percentage of your house’s total value. When you move out of the property, the lender will sell your house on their terms to recover their money.
Often, this is the route retirees choose as elderly homeowners tend to receive more for their house than those who are younger. This might seem like a great option— at first. It’s important to remember that a reverse mortgage is not without its share of fine print.
First off, a reverse mortgage will only work if you have 100 percent equity in your home. Any other existing loans against your house must be paid before you take out a reverse mortgage. This could cause a problem for some homeowners who need to repay their loans before retiring.
Remember that the lender of the reverse mortgage can demand repayment in full if you don’t insure the property, maintain it, or pay the taxes required. If a new owner is added to the property’s title or additional loans are taken against the house, demands for immediate repayment can also be made. As the primary homeowner, you must comply.
A reverse mortgage won’t only impact your current finances. It will also affect any plans you have to bestow your estate to your heirs. If it’s your wish for your children to inherit your house, consider if they can afford this mortgage payment as well. It’s crucial to consider your mortgage when they inherit the home as they will inherit the payments, too.
If they can’t afford the payments, the house could be lost. Also, if there is ever reason you might need to move out and you decide to sell your home, all of the sale’s proceeds will be used to repay the reverse mortgage. Of course, all of this depends on the size of the loan and its value. This could potentially leave you with no money left or could place you in a difficult financial situation at a critical time.
Should I Sell My House in Retirement?
If your retirement is on the horizon — even if it’s several years off — you’ve likely considered the question, “Should I sell my house when I retire?” It’s only natural to put some thought into selling your house as part of your retirement plans.
To help you develop a firm plan for selling your house in retirement, we’ve compiled the likeliest scenarios you’ll face. We then highlight steps you can take to make your retirement dreams a reality.
Scenario 1: Selling Your House as a Means of Financial Recovery
Many retirement accounts suffered notably during the Great Recession of 2008. By some reports, savings were halved as a result of the market turmoil that swept the nation.
If you’re one of the many thousands of investors who incurred such losses, all is not lost. You likely hold another asset that can help shore up your retirement finances: your house.
Stocks, bonds, certificates of deposit, insurance plans, and more may all play a role in your retirement. Real estate can have a significant impact on funding your retirement as well, especially if you’ve owned your home for many years or live in an area that’s seen property values appreciate in recent years.
No market remains a seller’s market forever, but timing your home sale well may be all the recession recovery you need.
If this scenario is true for you, then the answer to the question, “Should I sell my house in retirement,” is a “Yes.”
Scenario 2: Selling Your House as Part of Your Retirement Plan
Even if you weathered that financial storm with few — or no — losses in your investments, selling your house as part of a retirement plan is a natural step for many homeowners who:
- Wish to downsize because the house is too large now that all the children have moved out
- Desire a move to a warmer climate
- Want to move closer to their adult children, grandchildren, or the kind of lifestyle they wish to have in retirement
This scenario creates a win-win situation for many retirees. A couple of examples of these wins are:
- They cash out a considerable asset that can pave the way to a fulfilling retirement
- They trade a house that’s too big for their needs and might require pricey repairs for a smaller, more affordable house or apartment
Scenario 3: Selling Your House Due to Unexpected Life Events
There’s one other retirement home sale scenario that can spring up: the unexpected. Maybe there’s an urgent need to provide extended care for a loved one two states over. Perhaps it’s a divorce; the divorce rate for those 50 and older doubled between 1990 and 2010.
These unexpected life events can do real damage to your retirement funds. One survey found that 50-to-70-year-olds with $100,000 or more in cash savings and investments faced unexpected expenses that averaged $117,000. If you find yourself facing similar and unforeseen life events, it might be a wise idea to consider downsizing in retirement, selling your house and seeking greater financial freedom.
How should I sell my home when I retire?
It’s understandable if you decide you don’t want to place another loan against your house. It’s not for everyone, after all. The money you earn from selling your home when you retire could give your retirement savings a well-deserved boost. It could also bring you the additional funding to do all the things you always dreamed of.
Regardless of whether you are familiar with the workings of real estate, you need to realize how selling your house with a realtor could take much longer than you would like. You probably want to get started on your retirement plans as soon as you can. But if you sell your house with an agent, it could take months or longer. You should not have to wait for the listing of your home to start the best of your time.
In situations like these, HomeGo is here to help. We can avoid all the money and time-consuming hassles that come along with selling your house the traditional way. HomeGo can close the sale of your house in just seven days.
Instead of having to put up with waiting for the fickle seller vs. buyer market, negotiating or decreasing the sale price, or having to repair your home before the sale, there’s no hassle with HomeGo. You can get the money you need and start your retirement plans soon.
On the same note, remember that real estate agents are not free, nor are they cheap. A traditional realtor can charge as much as 6 percent of the home’s sale price to cover their commission. Some real estate agents could require that you make repairs to your home to increase the curb appeal.
All of this might not seem like much at first, but all of these costs can quickly add up and subtract from your profit. HomeGo, on the other hand, doesn’t charge any fees or commissions. Your home is bought as-is and you don’t have to make any repairs. HomeGo will buy your home for the highest possible cash value.
Three Options for Using Your House for Retirement Funds
Homeowners who consider leveraging their house to help fund their retirement typically have three options:
- Taking out a reverse mortgage in retirement
- Selling a house the traditional way with the services of a realtor
- Selling a house the quick and easy way
When arranged according to ease, stress, and homeowner control, those three options break down as follows.
1. Taking out a Reverse Mortgage in Retirement
In a reverse mortgage, a lender makes payments to you based on a percentage of your house’s total value. When you no longer occupy the property, that lender will sell your home on their terms and recover the money they paid you.
To receive a reverse mortgage, most lenders require you to:
- Own your home, which must be your primary residence
- Be at least 60 years old
- Pay off any debt or existing mortgage on the home or use monies from the reverse mortgage pay it off
- Set aside reverse mortgage funds to make any repairs required to qualify for the reverse mortgage
As a means of bolstering one’s retirement finances, a reverse mortgage might be right for some people. But it’s also risky. Tens of thousands of people lose their homes through a reverse mortgage arrangement each year. Financial support that is difficult to navigate, very stressful, and restricts homeowner control on several fronts? A reverse mortgage doesn’t have much to offer.
2. Selling a House the Traditional Way with the Services of a Realtor
Another option for downsizing and selling your house for retirement funds is the traditional realtor approach. While not as fraught with potential hazards as a reverse mortgage, taking this path means interviewing agents, signing a listing agreement, making all necessary repairs and property upgrades, dealing with showings, and perhaps waiting as long as two months for a sale to go through. Can you imagine doing all of that while also downsizing to retire?
It also helps to keep in mind that this process brings some real costs with it. A traditional real estate agent charges fees and requires as much as 6% of your sale price for their commission. And some realtors may recommend that you repair or renovate your home to increase its sales appeal. Expenditures such as these can quickly add up and take away your much-needed profit.
Going the traditional route does have its advantages, however. Though stressful and not a process that affords the homeowner a great deal of control, it’s an avenue that’s been around for some time and is, therefore, a more comfortable experience than a reverse mortgage.
3. Selling a House the Quick and Easy Way
People shop online now, from the comfort of their own homes. You can watch television on your computer. Smartphones have revolutionized the way we communicate with one another, take pictures, and play games.
Times change. Advances in customer service and technology mean there’s more than one way to downsize, retire, and sell your house. When ease, stress, and homeowner control are all factored in, HomeGo is an option you must explore. The process works like this:
- You provide your address and tell us a little about the house. We buy houses as-is, so don’t worry about us pitching you any repair jobs or curb appeal projects
- Together, we schedule a quick, 10-minute walk-through of your property. We’ll come to you, often the very same day you provide your address. It’s much better than one showing after another of random people filtering through your life’s possessions
- Accept our on-the-spot offer and consider your home sold. The timeline is yours to control: move today, tomorrow, or in a few months
It’s Easy to Sell Your Home with Homego.
HomeGo provides a straight-forward sale process that’s designed to benefit you, the seller. This means there is no closing costs, no hassle, and no waiting around. We can give you a head start on your plans for retirement in just seven days. You have worked hard to have savings for your golden retirement years; you shouldn’t have to worry about the bill. Don’t wait, get started now with HomeGo!