Many people are looking for ways to increase their retirement
income. For most of these individuals, their homes are the
greatest asset. A large section of the aging population has
failed to plan effectively in order to have sufficient savings
at retirement. They now are looking to their real estate to
supplement their retirement income.
Real estate values are very unpredictable, especially now with
the decrease in the real estate bubble. Prices are falling in
some cities and flattening in others. It will take some
planning to get the most from selling your real estate to
supplement your retirement.
Be Realistic. To plan effectively, you must be realistic about
the price you may get for your home. Real estate is an up and
down market, so you should assume a traditional real estate
market for valuating your home, with gains in value equal to
the inflation rate. At retirement, you will have the same
purchasing power you currently have. If gains in real estate
values are better than the inflation rate, then you will have
more. Just don�t count on it.
Get the Most from Your Real Estate. People used to work hard to
pay off their mortgages for homes they planned to raise their
children in and retire. Since 1989, the number of people 65 and
older with mortgage debt has nearly tripled, adjusting for
inflation. Making payments on real estate in retirement years
will deplete your savings and retirement income faster than any
other expenditure.
There are three reasons to pay off your real estate mortgage �
(1) decrease expenditures in your retirement years, (2) use the
mortgage interest rate that you will save to increase your
retirement savings, and (3) build more equity, in case you need
it as income on which to live later. Paying off your mortgage is
a good thing to do, regardless of what the real estate market is
doing.
Downsize Your Home. If you are living in a home that is larger
than what you need, do not hold on to it for sentimental
reasons. Selling the larger home for a smaller one can: (1)
give you a smaller mortgage payment than you currently have, or
(2) purchase a smaller home outright with no mortgage. It also
means less physical upkeep by you, as well as less maintenance
and repair costs in the future during retirement. Please keep
in mind that there will be selling, moving and new home
renovation costs that must be deducted from the sale proceeds.
Sell the Extra Real Estate. If you have a second home or
vacation real estate that will not be your retirement
residence, you may wish to sell this extra real estate now,
putting the sale proceeds into your retirement savings. You can
put the mortgage and annual upkeep payments for this property
into your retirement savings, too.
Reverse Mortgages. Though these products have been around for
some time, we are hearing a lot about them lately. Such
mortgages give you 50 percent or more of your home�s value with
no mortgage payments, which are collected by the lender at your
death or if you sell the real estate.
Beware! Reverse mortgages should be used only as a last-ditch
effort at survival. The interest and fees added to your
mortgage debt can be very costly. If you must consider a
reverse mortgage, here are a few smart tips:
� There are only a few reverse mortgage products now on the
market, but others are coming soon. So, wait two or three years
to garner more options and possibly better products.
� You must be 62 to qualify for a reverse mortgage loan, but
wait as long as possible to take such a loan. The younger you
are, the smaller the loan and higher the cost over time.
� Check out all of the products on the market and get
independent financial counseling on the best one for you. They
may look the same upfront, but the number of years and the loan
value differ greatly between products, as well as the costs over
time.
� Do not buy into the hype! Mortgage brokers receive a large
commission on these products. If you feel you are being pushed
in this direction, check out other lenders.
� Plan ahead. If you move and sell your real estate, the lender
receives all that is due on the reverse mortgage from the sale
proceeds. This could actually leave you in a worse financial
state.
About The Author: John Harris is an expert researcher and
writer on real estate topics such as economics, credit
improvement tips, home selling advice and home buying
preparations. For more on San Diego Homes for Sale visit
http://www.twtrealestate.com
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