The financial crash has shown many of us that even “the best laid plans” may not work out. Retirement next eggs have been decimated and equity in the family home has been reduced drastically as many reaching retirement age had counted on this component to help fund a comfortable retirement.
Still it is not time to shun planning. Gathering information on the real estate market and knowing your options going forward is crucial. As you listen to national and local real estate statistics and forecasts it is most important to be realistic when it comes to the value of your home and the likelihood of home value appreciation.
Trying to hold off retirement or family moves until your home value comes back to the high values during the 2002-2006 boom years may leave you disappointed.
In the past year we have seen some appreciation in sales prices – 12% in some locations – as large inventories of homes for sale have been reduced and the lowest mortgage rates in decades have been available to those with good credit.
It will most likely take many years and much better employment statistics for home values to make big gains. Also as interest rates rise in the future, as they most likely will, appreciation may be held in check.
There are definitely options for homeowners who need access to funds to pay expenses and remain independent:
- Reverse mortgages (homeowner must be 62 years old. Check with financial advisers)
- Home equity line of credit
- Single-purpose loan (check local Area Agency on Aging as these loans are excellent alternatives for home repair offered by state and local governments)
- Sale of the home
- Sale-leaseback plan (family member or friend buys the home from seniors who don’t want to move and then they become a renter with a life-time tenancy)
- Property tax relief program
Should the decision be made to sell the home consider the following:
– Estimated net proceeds received from the sale of the home
– Estimated cost to maintain a new home or rent a new home
– Property taxes and availability of tax relief programs in the new location
– Availability of health-care and senior services in the new location
– Proximity of new location to friends and family
– Availability of transportation, shopping and cultural and recreational activities at the new location.
Family planning discussions should be held often and popular thinking is that the 40/70 rule has become an important beginning marker – when parents are 70 and can voice their wishes and desires with their grown children (40 yrs old) on how they would like to spend their senior years – before situations have reached a point of urgency.
As with all plans goals change and adaptation is necessary. It’s important to keep up with the latest information and know your options.