When it comes to financing your retirement, there are a lot of different options to choose from.
One popular option is to use your home equity to help pay for your golden years. But is this a good idea? Let's take a closer look at the pros and cons of using your home equity to finance your retirement.
If you have a solid financial position with your home mortgage — that is, it's mostly or entirely paid off — tapping into your house equity to assist you reach your retirement goals may be a smart idea.
One of the biggest pros of using your home equity to finance your retirement is that it can provide you with a steady stream of income. This can be a great way to supplement your other sources of retirement income, such as Social Security or a pension.
Another pro is that this option can help you avoid having to liquidate other assets, such as stocks or mutual funds, in order to come up with the money you need.
Reverse mortgages are a good alternative for individuals who don't have access to cash and possess a substantial amount of equity in their property. Reverse mortgages are a little more challenging to understand than a refinance or HELOC, so do your homework and contact a loan expert.
On the other hand, there are a few potential downsides to using your home equity to finance your retirement. One is that it could put your home at risk if you're unable to make the payments of a traditional HELOC.
Whereas, you don't have to make any payments on a Reverse Mortgage Loan as long as you live in your home. When you sell your home or no longer live in it, you or your estate will need to repay the Reverse Mortgage Loan plus any interest that has accrued.
Another con to using your home equity is that the interest rates on home equity loans are typically higher than the rates on other types of loans, such as personal loans. You will want to discuss the rates on the available loans so you understand what might work best for you.
So, is it a good idea to use your home equity to finance your retirement?
It depends on your individual circumstances. If you're comfortable with the risks and you have a solid plan in place, it could be a great option.
But if you're not sure, you may want to talk to a financial advisor or loan professional at Simple Reverse Mortgage to see if it's right for you.