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How can I make my house an asset when I retire?
If you want to make your house an asset for your retirement, there are several things you can do to make the most of the equity, such as -
1. Downsize and use the extra proceeds to fund yourself
2. Rent the house out for extra income and live elsewhere
3. Rent a room out if you have spare space but don't want to move out
4. Get a reverse mortgage, freeing up the equity in your house to fund yourself
5. Pay off any debt that you might have, allowing you to retire without debt on your credit file.
If you’re approaching your retirement, or are still a little while off but like to get things planned, you may be wondering how your house plays a part when you retire. There are several options that you can explore to get the most out of your house for you to consider.
If you live in a bigger house and aren’t utilising the space anymore, many decide downsizing from a house to a bungalow is a good idea. This allows you to free up your finances and gives you the freedom to do what you like with them; some choose to use it to travel and spend their retirement sightseeing, some choose to take these proceeds and invest them. This can be a great option for a variety of plans and works well for a lot of retiring homeowners.
Should I sell my house and rent when I retire? A thought many of you consider to free up the full proceeds of your house sale rather than just the excess after buying another house. This can be a good step for those who are looking to pass on cash in an inheritance or who want to help children buy their own property.
If you choose to sell your house, you also open up the opportunity to relocate if you wish to. This may be moving closer to family, or some retiring homeowners decide to move abroad to enjoy their retirement years.
4. Renting a room out
If you’re not fully prepared to sell your house but find that you do have rooms that you’re not making the most of anymore, you might think about renting a room out for some extra money each month. The extra money can boost your income without having to sell which is ideal for those who are emotionally attached to their house and aren’t ready to say goodbye.
5. Reverse Mortgage
Again, if you’re not ready to sell your property but want to subsidise your retirement, you can look into getting a reverse mortgage. Unsure what a reverse mortgage is? This will allow you to release any equity that you have in your house without losing your rights to ownership. A bonus of this is that if you do decide that you’re ready to move out and downsize or relocate, you can pay off the mortgage with the proceeds of the sale and still have enough to find yourself somewhere else.
6. Pay off debt
If you have any debt looming over your head, it’s a good idea to clear it before retiring. As your disposable income will decrease when you retire, getting rid of any monthly payments out of the way will always be beneficial. Depending on what sort of debt you have, it can often be a good idea to consolidate your debt through something like a home equity loan.
Usually, home equity loans have a much lower interest rate compared to credit card debt or loan repayments, so using your property to pay off these debts and have a lower, more manageable payment each month can be a great way to get your debt under control.
Some retiring property owners will choose to sell their house and then move in with family instead. There are many reasons that someone will decide to do this, but the most common are-
To spend more time with their family, often if there are grandchildren
Save money in their retirement to leave an inheritance
Need care and support.
You may also be considering releasing equity in your property to modify your current house; if you think that at some point you may need a stair-lift or a walk-in shower. It does tend to be easier to sell your current house and find somewhere more suited to your needs, though- it avoids you having to live in the property during the construction work and long-term will likely be cheaper if you downsize.
Does my house count as part of my retirement plan?
Whilst you can include your house in your retirement plan, it’s important not to rely on it. It’s usually the largest asset someone has when they retire, so to not include it would be a mistake. It’s equally a mistake to plan your retirement around your house. As the property market can change very quickly and so having other plans is always a good idea.