There are many real estate mistakes that retirees make, but there are some that can hurt retirement more than others, according to a recent article from Morningstar.
The article outlines four common mistakes that retirees make when it comes to real estate and their homes, which include, thinking of their home as a ‘titanium piggy bank’ and not understanding their options for unlocking home equity.
Though these two points are basically the opposite of one another, the article is pointing out that tapping into home equity can have its place, but also needs to be used only if the homeowner is aware of how to use it.
“There are plenty of ways to access home equity,” the article says. “You can sell your home, buy a lower priced house, and pocket the difference. Home equity and reverse mortgages are options too.”
But the best financial plan is one that is planned out based on the homeowners long-term financial goals. Reverse Mortgages are brought up as an option for homeowners over the age of 62.
“The cash from these loans can be used to supplement ongoing or emergency cash needs, long-term care or even fixing up a home to make it more accessible, the article says. “If you’re house rich and cash poor, they may be worthy options.”
On the flip side though, some homeowners think of their home as a ‘titanium piggy bank’, the article points out. “While using home equity as an asset in retirement planning can be a viable idea, it’s not a guaranteed proposition,” the article says. “Your home isn’t the solid forced savings vehicle it used to be.”
The main point is that homeowner should not simply assume they have significant home equity to tap before doing their research on all options. Reverse mortgages can be extremely helpful, if used correctly for the right homeowner.
Read the full article from Morningstar.
Written by Alana Stramowski