A little over two years ago, you accepted a buyout offer from the company where you’d worked for thirty-one years. At the time, there seemed to be several alternate employment opportunities (in any event, you would have been let go in the downsizing). Unfortunately, none of those other offers materialized. You had remarried just prior to losing the job; even with the buyout sum, the careful plans the two of you had made for sharing expenses – and for liquidating debt prior to retirement – became impossible to execute. Your husband, who is 64, plans to work up until his age 67. His position seems very secure, bringing in enough to cover basic expenses for both of you. In contrast you, at age 63, have despaired of replacing your income at anywhere near its former level. You’ve used up your settlement money and have gone through the bulk of your investment accounts, but have so far managed to avoid tapping into your own 401K or IRA.
You are the sole owner of your home, and the plan was for you to continue to cover the mortgage payments, with the home fully paid for by the time you reach age 65. The regular upkeep and maintenance expenses have been largely covered by your husband. Your estate planning documents stipulate that, should you be the first to die, he can choose to remain in the home for the rest of his life, but then the property goes to your daughter. Because of your current job situation, you would not qualify for a second mortgage on the house, so spending down your retirement funds seems the only choice.
Tapping into the equity in your home equity is possible, whether you’re employed or not. Consider applying for a reverse mortgage rather than a second forward mortgage. Income requirements are minimal, since you will not be obligated to make monthly payments. The proceeds from the reverse mortgage loan would first go towards paying off the remaining first mortgage, this relieving you of the need to make mortgage payments. Although you would be the only borrower, your husband, as an age-eligible non-borrowing spouse, would be able to continue living in the home should he survive you. Meanwhile, your estate plan could still name your daughter as heir to the home.
She would have the choice of paying off the mortgage and keeping the home, or of selling it, retaining any excess proceeds. Meanwhile, if you are able to find employment and want to build back the home equity, you can choose to make mortgage payment to the extent you are able with the added benefit that any payment made against the reverse mortgage balance would also flow dollar for dollar into a line of credit guaranteed to grow at the same rate the mortgage balance is accruing interest.
When best-laid plans go awry, using your housing wealth can save the situation.
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894