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With Rebound of Lakeland Fl Homes For Sale, Home Equity Can Be Part Of Your Retirement Plan

August 15th, 2013 12:11



With Rebound of Lakeland Fl Homes, Home Equity Can Be Part Of Your Retirement Plan With Rebound of Lakeland Fl Homes For Sale, Home Equity Can Be Part Of Your Retirement Plan Your equity in your home may be a great source of income for building your retirement. With prices of homes in Lakeland FL rebounding, many homeowners may once again call their home as their most valuable investment. However, when calculating retirement income, home equity is generally not taken into consideration, but doesn’t it make sense to include home equity in planning for sources of retirement income? In some cases, it does but others may encounter problems in assuming that home equity can be a source of retirement income. In order for a homeowner to access home equity, you have to find a way to obtain it, and that usually means either borrowing it or cashing it out by putting your Lakeland Fl home for sale. Borrowing home equity is expensive and very complicated since your property is not a liquid investment. You can get a HELOC then use the funds as necessary, but it may cost you since you will need to pay off the loan or you will have to pay a monthly interest on the borrowed amount, which kind of defeats the purpose. One option for getting your home equity is through a reverse mortgage, which comes at a high cost like loan origination fees, mortgage insurance premiums, and closing costs. On top of that, you still have the ongoing monthly interests rates and fees to pay. The upfront fees can be expensive. For a standard HECM (Home Equity Conversion Mortgage), the mortgage insurance premium is 2% of the full value of the Lakeland Fl home and not the loan amount. There is a cheaper alternative which is the HECM Saver Loan, which has a lower mortgage insurance premium of 0.01% but the catch is the interest rates are higher. These options are generally seen as “back up” plans to access home equity when all other means are exhausted. Selling your Lakeland Fl home will be the better option to get access to your home equity to use for retirement income. Many future retirees would have been hesitant to put their Lakeland FL Homes for Sale during the economic downturn, and even if their homes’ values did not depreciate or could sell their homes at a higher price, there just wasn’t enough buyers in the market. Either they could not sell their Lakeland Fl home to buy a new one o they couldn’t qualify with the tightened credit policies. A retiree just could not count on being able to sell their Lakeland Fl home and access the equity for their retirement income. But there are times when tapping into home equity as a source of retirement income may be a good plan. The IRS gives homeowners an incentive of up to $250,000 in tax-free gain for individual filers and $500,000 for couples who file jointly. In order to receive this tax-free gift, you must have lived in your Lakeland fl home for 2 of the previous 5 years before you sell it and have some home equity. Of course you will have to put your Lakeland Fl home for sale, but it may be worth it. I haven’t seen an investment where you get a tax break along the way through the tax-deductible mortgage interest and property taxes and then receive a tax-free benefit as well in the end. If the homeowner is unable to sell their Lakeland Fl home right away, they can always rent out the home for a couple of years until a sale is feasible. They could still get the tax-free benefit as long as the ownership and use test are met. Although selling a Lakeland Fl home with a tenant living in it would be less than ideal, but the benefit could far outweigh the hassle for most people. Your Lakeland Fl home could be not just a place to live, but an investment for your future as well. Keep in mind the home value’s potential appreciation as a future strategy to downsize and buy a smaller home, or to sell the Lakeland Fl home and invest the tax-free gain. Although there is no guarantee if home prices will continue to go up and you may not be able to sell your home at the time you want, but if you are able to use this strategy, it will greatly boost your retirement income. Be sure to check with your Certified Public Accountant (CPA) and your attorney before deciding on any of the aforementioned tips above. Authored by Petra Norris



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