For people approaching retirement with modest savings but with considerable home equity, CBS News’ MoneyWatch offers several options one should consider to supplement retirement savings, including using a reverse mortgage.
While not all retirees—or pre-retirees for that matter—have the same financial situation, older Americans tend to have more home equity than retirement savings and other financial assets, says MoneyWatch writer Steve Vernon, citing a report from the Boston College Center for Retirement Research.
And where home equity has in the past been commonly used as a cash reserve for individuals to draw on in the event they incur high out-of-pocket medical or other long-term expenses, it is becoming more commonplace for homeowners to use home equity to improve their day-to-day finances in retirement.
Two practical ways to make this happen, as identified in the Boston College report, are via the use of reverse mortgages or downsizing to a smaller residence.
“Reverse mortgages are best for those people who want to stay in their current home for the rest of their lives,” writes Vernon.
In its report, Boston College details various aspects of a reverse mortgage, including basic definitions, fees associated with Home Equity Conversion Mortgages (HECMs), the potential disbursement a borrower may be eligible to receive, along with other key information.
Published in September, the report does not get into the most recent rule changes that have transpired in the past weeks, particularly guidelines regarding the financial assessment.
“Clearly there’s no one-size-fits-all solution to the best use of your home equity in retirement,” writes Vernon. “The above strategies primarily consider the financial aspects, but for many people there are strong emotional and psychological attachments to their homes that should be considered as well.”
Read more at CBS MoneyWatch.
Written by Jason Oliva