How can retirement at home become a comfortable financial option?
Financing a comfortable retirement can be a challenging goal for any individual. It is important to develop a plan that allows for many contingencies and projects sufficient income for retirement into the future. Due to both foreseen and unforeseen factors, many individuals find themselves falling short of these financial goals and having insufficient funds available for retirement as a result. When this is the case, what options are available for them particularly when it involves staying in their home?
For many individuals, the largest asset that they own is their home. Throughout their life, they made mortgage payments and repaid their loan balance instead of saving in separate accounts and now have insufficient assets available to fund their retirement. In these situations, one option that is available is to sell their home and downsize to a cheaper alternative. While this is often considered to be a decent option, many people want to spend their retirement in their home and maintain a basic level of familiarity and comfort in the surroundings that they have many memories in.
One option for these individuals is a reverse mortgage arrangement. A reverse mortgage is a situation where an individual can take out a new mortgage on a home that they already own. The new mortgage is repaid while they are living in the home or deferred until a later time. The lender has as lien on the home, on which thy will take the rights of upon default of the individual borrower. However, depending on the terms of the reverse mortgage, this will often only be triggered upon the death of the home owner or upon a significant period of non-payment.
As a result, a reverse mortgage provides many individuals with the financing they need to maintain their lifestyle while they are in retirement, all while living in their home. While a reverse mortgage involves a form of borrowing, an existing asset that they own is effectively being borrowed against and generally speaking, the home owner can remain in the home for the remainder of their lives in a comfortable and familiar setting.
Before entering into a reverse mortgage arrangement it is important to familiarize yourself with the basic contract terms including what occurs to the home upon default by the home owner. Contact an attorney prior to entering into a reverse mortgage arrangement and work with someone with experience drafting reverse mortgage agreements.