Many Americans worry about a lack of income in retirement—even more than poor health or death. Often the question, “Should I sell my house when I retire?” is one of the first people ask themselves when planning for retirement. It is an option, but it’s not the only one.
When Should I Sell My House?
There are several factors to consider when evaluating whether to keep or sell your home in retirement. One of them is whether you want to.
Some retirees would like to age in place by staying safely in their current home, while others are ready to downsize to a condominium or apartment with fewer maintenance responsibilities.
Another factor to consider is whether you can afford a mortgage payment plus maintenance, insurance, property taxes, and other expenses that are part of homeownership. If you can’t, selling is something to consider.
“It could also make sense to sell if the house is paid off and there is a sizable equity built-up in the house, especially if you need the money. The ultimate goal is to be able to tap into the money tied up in the house,” says Lamar Brabham, CEO and founder of financial services firm Noel Taylor Agency.
When Does It Make Sense to Keep My House?
As with selling, the decision to keep your home depends on several factors that include affordability. If your mortgage is paid off, for example, you’ll have less overhead. That can make it easier to age in place.
In addition, depending on real estate market conditions when you’re considering selling, you might not be able to find affordable, alternative housing. The goal for most is to reduce, not increase, housing costs.
What Are the Alternatives to Selling My House?
Many people who prefer to stay in their current home worry that a reduced income will make it difficult to afford typical homeownership expenses while maintaining an emergency fund. Here are four ways to create a financial safety net, whether it’s for home repairs or an unexpected property tax increase.
1. Find a Housemate
“Whether you formally convert your home into a duplex or rent out an extra room to a friend, gaining some extra money each month can help you manage the cost of utilities and other homeowning expenses,” says Ann Martin, director of operations at Credit Donkey.
There are a number of ways to find a housemate, including Silvernest, a platform that connects homeowners with renters. It offers a turnkey process for assessing compatibility, performing background checks, creating a lease, and automating rent payments.
2. Consider a Reverse Mortgage
A reverse mortgage is a loan that lets qualified homeowners, typically ages 62 and older, take cash from their home’s equity while still living there.
Converting that equity into a lump sum, monthly payments, a line of credit, or a combination of the three allow you to enjoy the financial benefits of your home’s equity without selling the property.
“A reverse mortgage is a good option for borrowers with equity in their home who need the maximum flexibility for accessing cash,” says Denny Ceizyk, a mortgage expert at LendingTree.
3. Consider a Cash-Out Refinance
Because a cash-out refinance replaces your existing mortgage with a new loan for more than you owe on the house, it gives you cash to spend or save for an emergency.
“Your monthly principal and interest payments may change, but you would have the additional cash you received from the new loan to make payments and enjoy life,” says Nicholas Amanti, an estate planning attorney with Fitzgerald Attorneys at Law, PC.
Ceizyk cautions that qualifying may be an issue if you have very little income or a low credit score.
4. Consider a Home Equity Line of Credit
Known as a HELOC, a home equity line of credit typically has lower interest rates than unsecured personal loans because the house is used as collateral.
It’s Up to You
Still asking, “Should I sell my house when I retire?” Whether you consider finding a housemate, applying for a reverse mortgage, HELOC or cash-out refinance, or selling your home and using the proceeds for rent, you’ll want to spend enough time exploring possibilities to be confident that you’re making the decision that’s right for you.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.