Retirement is considered a golden-period — a time when you’re free from your responsibilities. You are free to explore the world and enjoy new activities.
However, when it comes to retirement, most people don’t have enough savings. According to one survey, retirees have approximately $200k locked in their home equity, but their 401k is half the amount. During the retirement phase, most people will have to tap into their home equity for financial assistance. The question is, should you sell your home before retirement.
What are your options in this regard? You need a residence that supports your goals. At the same time, you need to take care of your finances. You can move to the suburbs to find an affordable place or you can move to the central city to enjoy all the essential facilities. It is possible to rent out your current property. Mortgage a new property, and use the rental income to pay for the new house. Depending on your income and savings, there are various options you can take.
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It is also possible to sell the house. The chances are that your home has appreciated and by selling now, you can earn a sizeable profit. The proceeds from the sale can be invested in commercial or residential real estate for a better return. On the other hand, there are cons to selling your home.
Pros & Cons of Selling Your Home Before Retirement
Most people choose real estate because it is a tangible asset. Investing in land has been the oldest way of earning a profit. By selling your home, you can lose this sense of security. Liquid cash is affected by the inflation rate. Savings accounts don’t pay well. Selling your home is not a recommended option if you are not going to invest the cash in other channels.
Some people avoid selling their properties because they don’t want to pay capital gains tax. That’s a valid reason; however, you don’t pay this tax unless your home sells for $500k (or $250k if you are unmarried).
Another reason for not selling the house is that you don’t want to repair the property. Maybe the house is in rough shape, but you don’t have funds to improve the unit. In that case, there exists a solution. Selling a house doesn’t have to be a hassle. You don’t have to manage the entire transaction or make repairs. You can simply sell your home as-is for a fair price. Click here to see how the process works.
I Need Money But I Don’t Want to Sell the House
Do you need immediate cash without selling your house? You have a few options.
A home equity loan can help you. You can borrow a fixed amount from your investment. The bank will charge you an interest rate. Later on, you can pay that money back. Another version of the same loan is the equity line of credit, which works like a credit card. You can borrow a sum each month. When applying for such a loan, carefully study the loan structure because they come with a high interest rate, and a balloon payment can be due at the end of the period.
Refinancing the home is another option. The process is long, but you can secure better interest rates, and there are no balloon payments. However, refinancing requires a stable income and a good credit score.
Another choice is owner financing. You will have to sell the house, but you’ll be acting as the bank. Owner financing brings attractive interest rates. You’ll be the lender and the buyer will pay back the loan through monthly installments. It is usually a short-term loan. Let’s say the borrower will keep paying monthly payments for 5 years, and after that, he’ll pay you a lump sum. It is a good option if you can manage the entire transaction. If the buyer is unable to pay back the mortgage, you’ll have to foreclose the house which is a legally complicated task. However, it is a valid option and it allows you to receive interest rate plus monthly earnings.
Fast Home Offer Utah is a local real estate solutions company. We help homeowners in stressful situations. If you need help selling a house or have questions about local policies/laws, please give us a call. Our team will study your case to guide you about your options in any situation.