Oct
12


9 Ways You Can Cash In on Your Home

Wednesday, October 12, 2011

Homes represent the bulk of even a moderately affluent pre-retiree’s wealth, beyond pension and Social Security income. According to research by the Society of Actuaries, only about 20% of homeowners plan to use their home equity to help finance retirement. Of those who do, few have thought about tapping their home's value and simply plan to sell it to generate retirement money.
Home-equity loan
Pulling money out of your home is often not advised if the money is needed for basic living expenses. Lenders also need to be sure you’ll be able to repay the loan. One retirement-friendly use of home-equity loan funds is remodeling, to make your home “senior-friendly” so you can continue living there as you get older.
Reverse mortgage
Reverse mortgages allow you to tap the equity in your home and stay there as long as you want, if you can continue paying property taxes, home insurance premiums and maintenance expenses. Reverse mortgage fees have been criticized as too high, but the government recently began supporting a less expensive home-equity-conversion mortgage called the HECM Saver loan (PDF). However, the “price” of smaller fees is that consumers get access to smaller a share of home equity.
Adjustable-rate mortgage (ARM)
A five-year ARM can be had today for less than 3% in some markets. If you know you will be selling your home within five years, getting a five-year ARM can allow you to pay down the principal balance on your loan and keep more of the equity for yourself when you sell the property.
Rent a room
It can be hard to let a stranger into your home. It can be harder still to afford your home on a retirement income. Talk to friends who have done this and learn from their experiences. Insist on personal references and consider paying for a background check before executing a rental agreement.
Rent your entire home
According to tax experts CCH, if you rent your home for fewer than 15 days a year, the money you receive does not need to be reported as gross income on your tax return. Also, if you’re planning to take an extended trip, your home can be safer if it’s occupied by a temporary renter than if you left it vacant. To increase your comfort level, work with established vacation-rental companies.
Downsize housing expenses
For many retirees, the smart housing move is literally that — a move to a smaller home and perhaps even a different state or country that offers sharply lower living costs. Be wary of being trapped in your home by memories or old possessions that can weigh you down emotionally and financially.
Mortgage-interest tax break
Interest payments on your home are still tax-deductible. You can deduct the interest on home-equity loans as well. Interest deductions rarely turn a bad decision into a good one, but they should be included in your evaluation.
Energy tax credits
Some energy tax credits were extended into 2011, and there are continued tax credits for solar and other alternative energy investments in your home.
Nontaxable home-sale gains
Gains on the sale of your current home — up to $500,000 in gains for a couple — are tax-free. You must have lived in the home for two of the past five years, according to tax experts CCH, but there can be exceptions due to health or other emergency factors.
Homes represent the bulk of even a moderately affluent pre-retiree’s wealth, beyond pension and Social Security income. According to research by the Society of Actuaries, only about 20% of homeowners plan to use their home equity to help finance retirement. Of those who do, few have thought about tapping their home's value and simply plan to sell it to generate retirement money.

Home-equity loan

Pulling money out of your home is often not advised if the money is needed for basic living expenses. Lenders also need to be sure you’ll be able to repay the loan. One retirement-friendly use of home-equity loan funds is remodeling, to make your home “senior-friendly” so you can continue living there as you get older.

Reverse mortgage

Reverse mortgages allow you to tap the equity in your home and stay there as long as you want, if you can continue paying property taxes, home insurance premiums and maintenance expenses. Reverse mortgage fees have been criticized as too high, but the government recently began supporting a less expensive home-equity-conversion mortgage called the HECM Saver loan (PDF). However, the “price” of smaller fees is that consumers get access to smaller a share of home equity.

Adjustable-rate mortgage (ARM)

A five-year ARM can be had today for less than 3% in some markets. If you know you will be selling your home within five years, getting a five-year ARM can allow you to pay down the principal balance on your loan and keep more of the equity for yourself when you sell the property.

Rent a room

It can be hard to let a stranger into your home. It can be harder still to afford your home on a retirement income. Talk to friends who have done this and learn from their experiences. Insist on personal references and consider paying for a background check before executing a rental agreement.

Rent your entire home

According to tax experts CCH, if you rent your home for fewer than 15 days a year, the money you receive does not need to be reported as gross income on your tax return. Also, if you’re planning to take an extended trip, your home can be safer if it’s occupied by a temporary renter than if you left it vacant. To increase your comfort level, work with established vacation-rental companies.

Downsize housing expenses

For many retirees, the smart housing move is literally that — a move to a smaller home and perhaps even a different state or country that offers sharply lower living costs. Be wary of being trapped in your home by memories or old possessions that can weigh you down emotionally and financially.

Mortgage-interest tax break

Interest payments on your home are still tax-deductible. You can deduct the interest on home-equity loans as well. Interest deductions rarely turn a bad decision into a good one, but they should be included in your evaluation.

Energy tax credits

Some energy tax credits were extended into 2011, and there are continued tax credits for solar and other alternative energy investments in your home.

Nontaxable home-sale gains

Gains on the sale of your current home — up to $500,000 in gains for a couple — are tax-free. You must have lived in the home for two of the past five years, according to tax experts CCH, but there can be exceptions due to health or other emergency factors.





Comments subject to review.
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Estella said
"That is a beautiful shot with very good lighting ." about Women Consider Owning a Home to be a Vital Component of the American Dream
on Sunday, May 12, 2013 @ 9:57 AM

Chris White - Team Leader said
"Unfortunately you are not alone. It's more than an outcry. The powers that be really need to come down harder on Bofa than they already are. Working on these short sale for over 2 years now I've uncovered down right fraud happening on the lenders parts. If they cared more about moving this country forward than protecting their own wallets then they would cut the red tape and approve these short sales in a timely manner. Our team made the wise decision to get BofA loans which were FHA or Freddie Mac backed, approved prior to listing on the market. Then we can list the home as "Price Approved" and close in 30 days. In this instance BofA does a full appraisal, rather than an incompetent "Broker Price Opinion" (nothing against agents but they have no idea how to make adjustments on comparable homes) and then the bank issues an "Approval To Participate" letter which dictates what price we can go on the market and take anything north of 88%. I really do hope your situation improves. " about Congressional Bill to Speed Up Short Sales
on Tuesday, August 30, 2011 @ 9:15 AM

Lisa Zeiner said
"We made an offer 4 months ago to BofA, and have heard nothing. It was a cash offer which is better than the zero money they are collecting now. And since the people don't care they are trashing the place, by the time BofA gets around to it our offer will be gone as the place is a mess!! Septic issues now, garbage being dumnped. All of this could have been avoided if BofA really wanted to correct their cash flow problem and sell these properties in a timely manner. They cry about cash but then do nothing intelligent to fix the problem" about Congressional Bill to Speed Up Short Sales
on Tuesday, August 30, 2011 @ 9:06 AM

Jones Ramirez said
"Thank you for the work you have done into this post, it helps clear up a few questions I had." about How do appraiser’s determine a homes value?
on Tuesday, April 19, 2011 @ 10:07 PM

HollyRobsonf said
"Hey - I am certainly happy to find this. great job!" about Bank of America to Offer Principal Reduction to Underwater Borrowers
on Wednesday, April 13, 2011 @ 6:45 PM