Millions of senior citizens in the United States live at or below the federal poverty level. Without robust savings or a generous retirement plan, many seniors find themselves struggling to afford basic living expenses. Additionally, about 80-85 percent of adults over 65 have at least one chronic medical condition, which typically involves associated costs like prescription drugs, copays, and surgeries that can add up quickly.
If you are one of the millions of American seniors who struggle financially, you may be wondering what options you have for boosting your income if you are unable to return to the workforce. The answers may lie in your home. If you own your home, read on to learn about some ways your home could help you build up your savings and get out of financial hardship.
Are you still living in your family home long after your children have grown up, moved out, and had families of their own? While it is nice to have extra space for when your grandkids come to visit, and homes hold a lot of memories, it may not be worth it to remain in a large house if you are struggling financially. Whether you live on your own or it is just you and your spouse, downsizing from a family home into a small house, condo, or apartment is often a wise financial decision for older adults. The value of your home has probably risen significantly in the years since you first purchased it, meaning that you will likely make a profit from the sale of your home, especially if you own it outright. You can use this money towards the purchase of a smaller home or to pay rent at an apartment without having to worry about mortgage payments. Ideally, you will still have some money left over to cushion your bank account or pay off debts.
Besides obtaining the proceeds from the sale of your home, downsizing also allows you to ease your financial burdens in other ways. Large homes come with a variety of constant costs, including repairs, utility bills, property taxes, insurance, and more. While smaller homes certainly require maintenance as well, it is estimated that for every $100,000 a house costs, you spend an additional $1,000 per year on maintenance alone. Plus, larger homes come with much higher heating, cooling, and electricity bills than smaller homes.
Renting Out Your Home
If you do not want to move out of your current home but you have a lot of extra space that you are not using, renting out a spare room, basement apartment, or other portion of your house is another way that your home could help you survive financially. This is not the right option for everyone, though, and if you are thinking about renting out your home, there are several things you should be aware of first. Your tenant will expect you to keep up with home repairs and maintenance, and there is always the risk of renting to someone unreliable. Run a background check on potential renters, call their references, and check their credit score to make sure that they don’t cause you even more financial strife by not paying their rent on time.
Getting a Reverse Mortgage
Another option if most of your wealth is tied up in your home but you do not want to sell is applying for a reverse mortgage. A reverse mortgage allows you to borrow against the value of your home and receive regular payments, a lump sum, or a line of credit. You do not need to make any monthly payments, you get to stay in the home you love, and you will have an immediate source of income, when otherwise you would not get this money unless you sold your home. You may be eligible for a reverse mortgage if you are 62 or older and own a single-family home, townhouse, or condo as your primary residence.
Although there are numerous benefits to getting a reverse mortgage, this type of loan can also be controversial and risky since elderly adults are often the targets of financial scams. To make sure that you are getting a fair deal from a trustworthy lender, you should always read reverse mortgage reviews online and compare several different lenders before making a decision. If possible, consult with a financial advisor or housing counselor as well to ensure that you are getting a good deal. Finally, it is a good idea to have an updated home appraisal before applying for a reverse mortgage loan. The value of your home may have increased quite a bit since your last appraisal, especially if you have completed any home improvements.