(BPT) - Most of us save and plan for decades to enjoy the period of our life when we no longer need to go into the office and work an eight-hour day for a paycheck.
But even with those decades of hard work, it can be tough to save up enough cash to cover all your costs in retirement. Many soon-to-be-retirees face a shortage between what they saved for retirement and what they actually need to live on.
For homeowners, that may be a problem that’s relatively easy to solve. Tapping into the equity in your home can help you stretch your nest egg quite a bit further.
Use a home equity loan or line of credit
You can tap the equity in your home with a home equity loan or a home equity line of credit (known as a HELOC). A home equity loan works like most other loans: you agree to borrow a set amount of money, receive a lump sum, and pay that back with interest and in installments each month.
A HELOC works a little differently, because it’s not a loan with pre-determined monthly payments. Instead, it’s a revolving line of credit, similar to a credit card. You usually have between five and 25 years to borrow against a certain amount of equity and repay (with interest) whatever you take out.
The time during which you can use the HELOC is called the draw period. The line of credit revolves during this period, so you can borrow and repay the balance multiple times. The total amount is due back in full with interest at the end of the draw period. Any time you have an amount outstanding, you will make monthly payments.
You can use a HELOC or home equity loan during retirement, but remember that you will need to pay the money back. You should have a plan in place for how to repay the funds — and the interest — before you agree to take a loan or a line of credit on your home.
Use a home ownership investment
A home ownership investment is a powerful way to unlock some of the equity in your home without taking out a loan.
The Unison HomeOwner program can unlock up to $500,000 of your home equity and the money can be used for anything you want — including paying monthly expenses, paying off debt or making home improvements. Because it’s a home ownership investment, not a loan, there are no monthly payments and no interest charges. Learn more at www.unison.com/homeowner.
Unison invests in the home alongside you. In return for the company’s investment in your home, they receive a portion of the future change in the value of your home. Unison shares both the upside and downside risk with you. When you choose to sell your home, up to 30 years later, if the home value rises, both you and Unison share in the appreciation. If the home value falls, both you and
Unison share the loss.
Consider a reverse mortgage
A reverse mortgage can allow homeowners 62 years or older to turn equity in their homes into cash in a way that provides them with the income they need through retirement. You can get your cash in a lump sum or in monthly payments, or in a line of credit.
But it’s important to remember that a reverse mortgage is still a loan that comes with origination fees and interest charges. It requires that you have no other debt on your property, so if you have an existing mortgage loan, you will have to repay that in full from the reverse mortgage proceeds. You will also need to pay the reverse mortgage loan back when you move out of the home, sell it or pass away.
A reverse mortgage can give you income in retirement and whenever the home is sold, the money is used to pay off the loan. However, reverse mortgages can cause a lot of trouble if you’re not careful, and the high fees that you incur when you sell the home can leave you in a worse financial position than if you skipped the reverse mortgage altogether.
Real Estate in the Digital Age: Why you still want an agent by your side
(BPT) - Homebuyers and sellers today can instantly check listings, monitor price fluctuations, research their credit scores and find lenders - all from their smartphones.
The advent of mortgage industry apps - which mingle aggregated data with complex algorithms in easily accessible formats - enables many shoppers and sellers to approach the process with more confidence.
While technology empowers consumers to shop and sell smarter, it can't replace the service and expertise of an experienced agent. Real estate agents know the local market and have access to the freshest sales data.
For sellers, real estate agents can price a house in line with the market to maximize earnings.
According to recent data from the National Association of Realtors, sellers using an agent earn $40,100 more per transaction. The median sale price for the 88 percent of sellers who worked with an agent was $215,000, versus a median sale price of $174,900 for the 9 percent of sellers who didn't use an agent, according to the association.
Buying a home is not like purchasing a plane ticket according to Greg Jaeger, president at USAA Residential Real Estate Services and a former real estate agent. He said buyers and sellers often fail to account for the psychological side of a transaction.
"An agent can help prepare the seller for offers that are intentionally too low," Jaeger said. "You're asking $250,000 for your home; I offer $200,000 and you're immediately insulted. An agent can keep you calm and focused on the end game."
Agents also help buyers navigate the rollercoaster of emotions in getting credit approved or viewing a home inspection report for the first time.
Jaeger knows of this psychological value not only as a former agent, but also as a father of a first-time homebuyer. His 24-year-old son recently bought an older home that was initially chockfull of cheaply done rehabilitation projects.
"The seller was pretty irritable about some items and flat out embarrassed about others," Jaeger said.
"My son's real estate agent really earned his commission in making sure the proper repairs were on track and protecting my son from the ire of the seller."
Homes, neighborhoods and their governing state laws are as diverse as the people living in them. Real estate agents are entrenched in those ever-changing state regulations, contracts, laws and practices.
"When making one of the biggest financial decisions of your life, it's important to have a trusted, experienced counselor by your side," Jaeger said.
Many resources are available to help consumers find the right agent, including USAA Real Estate Rewards Network, a program that gives members access to USAA's network of real estate agents and rewards when they buy or sell.
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