(Familiar Traits) Retirement from the workforce opens up opportunities you may not have been able to take advantage of in your working years, including discovering new passions and spending more time with the people you love.
While your income may be lower than if you were working full-time, being free of financial burdens like credit card debt or a mortgage can provide extra disposable income that allows you to explore hobbies, develop new skills or focus on your career. spend time living life to the fullest.
In fact, if you’re over 62, own a home, and have equity capital, you can extend your retirement runway by borrowing against that equity. A home equity conversion mortgage, such as those available from Guaranteed Rate, a leader in mortgage lending and digital financial services with more than 850 branches in the United States, can switch the roles of lender and borrower. Homeowners can stay on their property and generate income, provided they own at least 60% equity in their home and are FHA eligible.
These mortgages cater to a very specialized segment of the market, but for those looking for financial flexibility, they can be a game-changer, said Jim Hettinger, executive vice president of operations, guaranteed rate. Capital accumulation over time is one of the most compelling reasons to buy a home. These loans offer longtime homeowners a way to enjoy the benefits of that equity in their retirement years while still maintaining the property and continuing to live in the house they call home.
While this type of loan shares many similarities with home equity loans, the requirements generally allow for more flexible terms for homeowners, who remain responsible for property taxes, home insurance, and home maintenance. Over time, the loan balance increases with the knowledge that the mortgage will someday be paid off, usually by selling the home, providing the homeowner with more flexibility and comfort in retirement. Meanwhile, homeowners receive cash from their homes in the form of a lump sum payment or line of credit without making monthly mortgage payments.
Consider these ways to take advantage of a home equity conversion mortgage and get the most out of your retirement.
With minimal restrictions on vacation time in retirement, you can get out and explore both domestically and internationally. With the flexibility to take extended leave, retirees can even enjoy trips dedicated to a specific hobby or pastime, such as golfing, shopping, biking, attending sporting events, appreciating the arts, and more. You might even consider buying a boat or RV to take your exploration to the next level.
Choose a new hobby
With more time now available, it’s possible to expand on the hobbies you enjoyed while working or take up a whole new business. The possibilities are nearly endless, but some options to consider include gardening, dancing, reading, baking, hiking, collecting antiques, restoring furniture, golfing, bird watching, sculpture or the production of wine or beer, among others.
Learn a new skill
Taking the time to learn a new skill can help keep your mind and body alert. Whether through formal lessons or watching online videos to learn, speaking a new language, playing a musical instrument, or cooking a new cuisine are popular options for improving your skills later in life.
For more ideas on how to live better in retirement or to access your free education guide, visit rate.com.
Benefits of a Home Equity Conversion Mortgage (HECM)
HECMs can provide peace of mind during your retirement if you’re worried about making ends meet. Using the equity you’ve already invested in your home opens up new sources of income while allowing you to stay in your home. Consider these additional benefits:
- It offers flexibility in withdrawing and repaying borrowed funds
- No pressure to make a payment, even if interest rates rise
- Untouched funds in your line of credit grow tax-free over time
- Any residual capital at maturity can be released to the borrower or to the heirs
- The line of credit remains the same, even if the market value of the houses falls
- The money spent on conventional mortgage payments can be used for other needs
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This is not a commitment to lend. The borrower must meet all loan obligations, including living in the property as a primary residence and paying property expenses, including property taxes, fees, and liability insurance. The borrower has to keep the house. If the borrower fails to meet these loan obligations, the loan will have to be repaid. If not, the loan must be repaid when the last borrower dies or sells the home. Prices, guidelines and minimum requirements are subject to change without notice. Some products may not be available in all states. Subject to credit and/or guarantee review; not all applicants will be eligible for funding. It is important to make an informed decision when selecting and using a loan product; be sure to compare loan types when making a financing decision. This material has not been reviewed, approved or issued by HUD, FHA or any governmental agency. Guaranteed Rate, Inc. is not affiliated with or acting on behalf of or at the direction of HUD, FHA or any other government agency. To find a reverse mortgage advisor near you, search for the HECM Advisor List at https://entp.hud.gov/idapp/html/hecm_agency_look.cfm or call (800) 569-4287.
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