The golden age of retirement, a time that most of us spend our lives waiting for. While it’s often painted as a picture of relaxation and leisure, there can be financial concerns attached to it. With a lower income and tapping into your savings, retirement can bring up a lot of worry and stress. However, you should be rest assured, as there are a few simple ways you can actually use your existing homeownership to garner a little extra cash once you’ve retired.
Sell & Rent
The easiest way to make money from your home is to sell it and put the proceeds towards the rent. As the current housing market continues to be on the rise, selling off your home, provided you’ve made headway on your mortgage over the years, can give you a big chunk of change in profit. Although you’ll have to factor in things such as moving costs, lawyers, etc. you should still walk away with a decent sized nest egg. For example, if you sold your home for $400,000 and owed a remaining $120,000 on your mortgage. That would give you a left over $280,000, before taxes and fees, to cover your rent, without having to tap into your pension or savings.
Downsize Your Home
If renting isn’t for you, not to worry. Another option to bank a little extra dough after retirement is to simply downsize. Many find that when it comes time to retire their children have moved out, and a larger house may no longer be necessary. Not only due to the cost to maintain the property, but also the work involved in owning a larger home. As most want to spend their retired years enjoying time away from work, cleaning and repairing a larger than needed home may become a burden. Selling your home and downsizing into something smaller can relieve the stress of cost and upkeep, while also leaving you with a hefty chunk of change left over for your adventures to come.
Your years of retirement are meant to be a time of relaxation and adventure. A time to do all those things you’re 9-5 schedule wouldn’t allow. For example, travelling! Retirement allows you to finally pack up and go on a little global exploration, and the easiest way to cover travel costs is to temporarily rent out your home while you’re out and about. Whether it be as a private vacation rental, or through a registered company like VRBO or Air BnB, renting out a home temporarily can help to give you the extra cash flow you need to polish off that bucket list.
Get A Reverse Mortgage
Much like many Canadians, most of what you own fits into two categories – The equity in your home and the money you have saved away. With today’s markets, the chances that the wealth of your home has grown over the years you’ve owned it is quite likely, so it takes up a large chunk of your total net worth. Having a home valued above what your original mortgage loan was may qualify you for a reverse mortgage upon retirement. Essentially, a reverse mortgage is a loan available to homeowners 62 and older, which allows them to convert part of the equity in their homes into cash. So opposed to making monthly payments towards your mortgage, your lender makes payments to you, as a type of “loan” until your home eventually sells, whenever that time may come. This type of “early equity bonus” is great for retirees who have no plan to vacate their home, as it gives them extra flow with no limit on when it needs to be paid back.
Secure A Line Of Credit
Despite saving for your retirement throughout your working years, there is no guarantee that additional expenses and unexpected shortages in cash flow can occur. Whether it be from over spending, under budgeting, or unforeseen circumstances, having a secured line of credit can act as a financial safety net. Unlike a regular loan, a secured line of credit uses an asset such as a car or home as collateral and generally has a very low rate of interest. Typically, as you draw from it you will be required to pay interest-only payments, however, some lenders do charge a small fee for keeping the loan open, whether you are dipping into it or not. Having this additional source of funds set in place before financial crisis strikes or to add a little extra cash flow to each month in retirement, can not only give you peace of mind, but can be a quick solution should you need to access money in a pinch.
There is often a lot of excitement that comes with retirement, however there can also be a lot of emotion. As it is a new chapter in life, it doesn’t come without much change and adjustment, especially when it comes to your financials. If you have any questions or concerns about financing your retirement or you would like to learn how to use your home to get a little extra financial comfort, don’t hesitate to give me a call at 705-315-0516. I am always happy to help you better understand your mortgage options to give you peace of mind while enjoying your golden years of retirement.