Retirement and the Mortgage Loan. Helpful Points to Be Aware of

Posted on August 8, 2009
Filed Under Mortgage | Leave a Comment

There is an unused reserve of cash in our homes; it’s the equity we’ve built into our homes over the life of the mortgage, or simply in owning our own home. If you’re in search of a great financial tool, learning to use the equity in your home to its fullest extent is something we Americans aren’t very good at accomplishing. Fear of a loss is the number one reason we don’t utilize our equity asset. But, if you will take the time to investigate lots of of the investment options available to us, the risk is minimal, and the return is great. In particular now during this period of extremely low interest rates, your home’s cash equity could be earning you a return of 18-20% in certain investment funds. Even if you borrow money in order to cash out the equity, you’re making money. The interest you pay is substantially less than the interest you’re earning.

Why are we so reluctant to take out a second line of credit, or boost our mortgage balance through refinancing? Many of today’s homeowners reaching retirement age do not fully realize all their investment options, nor do they realize how investments like growth funds work. They are incredibly reluctant to try anything that is beyond the sure bet of a certificate of deposit. In so doing, they are missing a tremendous opportunity to make a greater return on their money, and let their money work for them.

Have a look at your 401k, where are your investments? Are they earning 5-8-10%? Unless you’re ready to retire, your 401k should earn at least 6-8% on your investment. Your home is earning you nothing on your investment, at least, not in the sense that the money must stay in the home in order for the home to enlarge in value. Rather openly, your home will appreciate in value if you do nothing but maintenance work and live in it. Your equity you have in your home, can make you up to a 15% return, while you still are fairly safe with your principal investment.

Speaking of 401k investments, are you investing the maximum each year in your 401k? If you’re self-employed, are you making use of the SEP retirement options that reduce your tax liability? If you’re not, you should really take into account the equity in your home as an investment choice for adding to your 401k, or establishing an SEP that will let you to invest your money in profitable and fairly safe global and growth funds. There are still lots of excellent opportunities in the stock market. There are segments of the market that are experiencing phenomenal and stable growth. The overseas markets, the domestic real estate markets, and the energy markets are growing, and are expected to see sustained growth. Put your money to work for you, in particular if you are several years away from retirement.

An additional retirement option that involves a mortgage loan is the reverse mortgage. This however, is not a way to make retirement savings; it is a way to simply access the equity you’ve built in your home, so that your monthly profits levels are adequate to sustain your most vital needs. Food, clothing, heat, and medicines are a must as you reach or near retirement age. A lot of times, the elderly are not as prepared financially as they anticipated that they would be. How can they supplement their monthly incomes? The reverse mortgage is the answer to a lot of older citizens’ financial needs. The reverse mortgage allows the person to withdraw a monthly sum against the equity they’ve built into their home. The interest payments are deferred until death, and the homeowner doesn’t have to be troubled about making a monthly payment, or borrowing money. They are able to use the money they’ve already put into their home, just when they need it most.

If you are past the age of 40, and you haven’t taken the time to consult with a financial analyst, I would recommend that you seek out one that you can trust and that you are comfortable in discussing your financial affairs with, and begin to look at your retirement options, your retirement needs, and your ability to meet those needs, based on your existing profits and savings. What you may find is that you aren’t near as prepared for retirement as you thought. The monthly profits needed will in all probability greatly exceed your anticipations. But, if you own your home, you may have just prepared more than you think!

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