My house is my retirement plan.
If I had a dollar for every time a client said that, I could retire today.
But that approach to funding your old age only works if….
Sell your house to retire
The value in your house makes your balance sheet strong, but doesn’t put food on the table or gas in the car.
That home equity is illiquid. You can’t write a check against it for the other necessities of life.
To get at that equity, you need to sell the house, or borrow against it.
A traditional loan requires that you have cash to cover the monthly loan payments. But hey, you’re not working. Where does that money come from?
The reverse mortgage was invented to allow seniors who can’t make monthly payments on a conventional loan to access the equity in their home.
But the fact that a reverse mortgage has no monthly payments does not mean that it’s cost free. [Read more…]