Financing your Retirement

There are some ways for you to save a bit of money if you are close to retirement and desire to stop making mortgage payments. You can trade down or use a reverse mortgage. Trading down means that you sell the home you are now living in and purchase a smaller home that is less expensive. A reverse mortgage means that the lending company makes monthly payments to you instead of the other way around. Both of these ways will increase your income during retirement.

You can also apply for a home equity loan, which is similar to a mortgage loan, and you will have to pay back the loan with interest.

Trading down may help you in more ways. The amount of money that is different between the price that you get for your home and the cost of the smaller home can be placed in your retirement funds, thus giving you additional income. The amount that you can receive depends on the value of the home you now have and the cost of the new home and other costs involved such as brokerage commissions, legal fees, closing costs, and moving expenses. Remember, also, a smaller home will reduce the amount of money you will be paying monthly for utilities, which will also give you more money. A Smaller home also means lower taxes, lower insurance payments, and maintenance costs. Consider everything that you are now paying out for the home you are living in and the smaller home you may purchase. This may give you a good idea as to how much you will be saving and have for your retirement. This could mean quite a bit of money, especially if you are paying out quite a bit in home repairs, lawn care, etc…

Trading down may not be something you wish to do if you watched your children grow up, if you love the space, wish to stay in the same neighborhood, or other personal reasons.

A reverse mortgage maybe something you would rather do that trading down. A reverse mortgage gives you and income, which is based on the equity that you have built up all the years paying for your home, and you do not have to pay the money back. In fact, you are the one that is being paid. The amount of money that you can receive depends on your age, the amount of equity you have, the interest rate the lending company charges, and closing costs. The more equity you have in your home and the older you are, the more your monthly payment will be. Normally, you will have lower interest rates and closing costs, which will also increase your monthly payments.

A reverse mortgage last as long as you remain living in your home. There are however, disadvantages associated with reverse mortgages. There are high upfront costs such as closing costs, no reduction in homeowner costs, real estate taxes, insurance, repairs, and other fees that go along with owning a home.