The invitation arrives, and your first thought is that it would be nice to go. Then comes the mental arithmetic. What’s the trip going to cost? What if the house needs something next month? Should you really take more money out of savings?
Being careful with money has probably served you well. Still, there’s a point where every enjoyable plan starts to feel like a financial decision you’d rather avoid. Retirement can become smaller than you intended, even when you own a valuable home and, on paper, have resources.
Before you decide that cutting back is the only answer, it may be worth looking at how those resources could support your life differently. Home equity is one place to start.
Your home may be able to do more for you
A Home Equity Conversion Mortgage, or HECM, is a HUD regulated, FHA-insured reverse mortgage for eligible homeowners age 62 or older. It lets you access part of your home equity while keeping ownership. There’s no required monthly principal and interest payment while the loan terms are met.
If you have an existing mortgage, it must be paid off when the HECM closes. That can remove a required monthly principal and interest payment from your budget. For some households, the benefit begins there, because money that was going toward the old mortgage can now support other expenses or help you start building that safety net.
If funds remain available after required payoffs and costs, the loan may also offer borrowing options that fit your needs. An adjustable-rate HECM can provide a line of credit, scheduled payments, or a combination. Richard can look at whether you’d prefer ongoing cash flow, a reserve you draw only when needed, or another arrangement.
Start with what you would like to feel comfortable doing
Perhaps it’s visiting family without worrying about the airfare. Maybe it’s repairing the house before a small problem becomes an expensive one. Or you want to stop checking your account balance quite so often because an ordinary month feels tight.
The goal gives the numbers meaning. The review will begin with what’s putting pressure on your budget, what funds you already have available, and how much equity the loan could make accessible. If you work with a financial advisor, he encourages bringing them into the review so the mortgage fits the broader plan.
You may be able to reduce withdrawals from other accounts by drawing on home equity for selected expenses. That’s something to compare carefully with your advisor, especially when taxes or investment decisions are involved.
Understand the cost alongside the benefit
A HECM is borrowed money, with closing costs and ongoing interest and mortgage insurance. The balance generally grows when payments aren’t being made, which affects the equity available later. You’ll keep paying taxes, insurance, maintenance and applicable association charges, and continue to use the home as your primary residence.
Those details will be explained alongside the benefit you hope to gain. Independent counseling with a HUD-approved counselor gives you another place to ask questions. He will also consider how long you expect to stay in the home and what you’d like your family to understand about the decision.
There’s no need to spend every available dollar just because you can access it. Having another resource may simply make you more comfortable saying yes to something that matters, or handling an expense without disrupting the rest of your plans or your family.
If retirement has started to feel more restricted than you expected, ask Richard to review what’s available before you keep trimming it back. Call or text 404-313-9785, or email richard.mcwhorter@ridgereverse.com. Richard can see whether your home equity could help you enjoy this chapter with a little more room in the budget.
Richard W. McWhorter, NMLS 1618644. Ridge Reverse, powered by Amerifund. Equal Housing Opportunity. Information is subject to change. This isn’t an offer of credit or a commitment to secure a loan. Eligibility and terms vary. This material isn’t from HUD or FHA and hasn’t been approved by any government agency.