Ari Koufos
REALTY EXECUTIVES | 617-799-8948 |

Posted by Ari Koufos on 2/5/2019

You got a reverse mortgage on your home to help with your retirement, but now, you want to move out. Maybe its because your kids want the house, or it just doesn't work for you anymore due to the climate or just how far away your family lives. Makes sense, when you were younger your life changed all the time, that doesn’t stop after retirement. So, are you stuck? Or can you sell it?

First, what is a Reverse Mortgage? 

A "reverse mortgage" is a special form of home financing that pays out based on the equity of your home. While you continue living in the home, the loan pays either a single lump sum, as a line of credit, monthly payments, or in some combination thereof to help cover the cost of your retirement. In the United States, the home must be the primary residence, and the homeowner must be over the age of 62 to qualify. While originally started to allow seniors to keep a more stable income, the IRS doesn't see it that way and instead looks at the income as a "loan advance" and taxes it accordingly.

Paying off Your Reverse Mortgage

Typically, the point of a reverse mortgage is for the income. That means you defer payment of the loan until you die, though it comes due when you sell the home or if you live elsewhere for a whole year. That means it usually falls to your heirs to handle it. They can pay it off, refinance it or sell the home. As a last resort, they can give up the property to the lender in place of repayment, but they give up all the rights of ownership to the property. Its possible to get a Home Equity Conversion Mortgage (HECM) from the FHA restricted to the value of your home. This type of loan protects your heirs since the mortgage can't be more than the value of the house, which means all they have to do is hand over the property and they are free and clear.

Selling Your Home Under the Reverse Mortgage

Selling your reverse mortgaged home can be complicated. Your reverse mortgage compounds interest over its whole life on both the owed interested and the borrowed amount. That means the mortgage could be substantially higher than the original borrowed amount. If you want to sell the home, no matter if its family or open market, first start by figuring out just how much remains on the mortgage. Include the whole borrowed amount, owed interest, compounded interest and any fees your lender may charge. Double check that number by requesting a payoff amount from the lender. They will send you an estimated payoff amount based on your current status and will only apply for a specific date range. Keep in mind that regardless if you sell the home for the original amount, if it takes longer than you originally planned, those numbers could go up.

Want to know if your home is a good candidate for a reverse mortgage sale? Refer to your local real estate agent to find out if the market value of your home is high enough to make it a good idea.

Posted by Ari Koufos on 2/14/2017

A retirement plan is more than an idea or a casual conversation with your significant other. It's a detailed description of how you are preparing for your life after retirement and what you want that life to look like. Furthermore, that plan will need to be updated when unforeseeable life events occur. Here are some tips that anyone can use when preparing for retirement.

Make your retirement checklist

Everyone's retirement plan will be unique. But one thing all good plans have in common are that they are tangible. Make a checklist of things you need to accomplish before, during, and after retirement. Depending on your situation, this may include:
  • investment goals
  • savings goals
  • pension and 401k details
  • healthcare cost changes
  • social security benefits

Determine how much you'll need

Lifestyle aside, retirement is expensive. And with inflation and cost-of-living increases it will likely only get more expensive. No one can predict, with 100% accuracy, what will happen in the future when it comes to stocks and investments. But when calculating your monthly expensive after retirement you should remember to adjust for increases in these costs. Put your post-retirement expenses in a spreadsheet (estimate high). Next to them put your savings and post-retirement income. This will allow you to balance your monthly spending post-retirement.

Consider your housing situation

If the home you currently live in is the home you want to stay in forever, you might want to consider potential problems that may arise. As we age, things like steep stairs, lawns to maintain, and other issues may become a factor. Others elect to move into condominium-style housing. Many people don't want to move too far from family, whereas others seek out better weather conditions. Whatever you choose, do your research in advance to learn just how much moving will cost (or save) you.

Don't touch your retirement savings

Emergencies may arise when we need to put the present before our longterm plans. But it's important not to fall into temptation of spending retirement savings on luxuries. Remember that financial troubles at retirement age are emergencies in and of themselves. Also keep in mind that there are often withdrawal penalties for taking funds from a retirement account.

Start your plan now and update it often

It's never too early or too late to start saving for retirement. Whether you're in your 20s or your 60s, there are always benefits that can come from good retirement planning. If you're young, all the more reason to begin planning early. Since rates of return on investments are anything but predictable, investing earlier is more likely to pay off in the long run. Another important thing to remember is to update your plan regularly. Once per year, around tax season, reflect on the retirement checklist and spreadsheet that you made. Are you making progress toward your goals? Is your income trending upwards or downwards? You may find that if you keep retirement on the forefront of your thoughts that you make more informed spending and saving decisions.  

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