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Home Equity Is Not a Retirement Plan

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Paying off a house is a retirement goal for many people, but don't count on equity to compensate for insufficient savings.

If you have a low-interest home loan, shortchanging your retirement contributions to pay it off early usually isn't a good idea. Here are some of the limitations of relying too much on home equity in retirement.

  • *What happens if you need to go to a nursing home? Selling your home to fund a move to a nursing home only works if your spouse can arrange for other accommodations or is moving into the home with you. Also, your equity may not be enough to cover the costs.

  • *Equity isn't fixed. Home prices rise and fall, and if you're not maintaining your home, that could also affect its value. Plus, translating equity into cash takes money and time. 

  • *The cost of selling. Commissions generally eat up 6% of the final sale price of your house. On top of that, you have possible capital gains taxes. While $250,000 (or $500,000 for couples) of capital gains is tax-free if you meet the requirements, years from now inflation and appreciation could make that amount seem meager. And if you have to sell quickly due to an emergency, you might have to accept a lower offer than you'd like.

  • *Beware of reverse mortgages. This type of loan gives you money to live on for the rest of your life based on the equity in your home, and it allows you to continue living there. But you typically get considerably less than what the home is worth, and the loan becomes due if you ever move.

    There are many cases when a home equity loan can be beneficial to your financial needs and can even help you increase the value of your home. If you are in the market for some home remodeling, look at using a Home Equity Line of Credit Loan (HELOC) to help you finance the project. Now is a great time to take out a home equity loan since Fitzsimons Credit Union is currently offering our Home Equity Line of Credit (HELOC) Special! Receive an introductory rate of 1.99% APR* through December 31st, 2017! Starting on January 1st, see rates as low as 3.50% APR*. You can also use a HELOC for any other worthwhile purpose such as a higher education or a new car- and the interest you pay may be tax deductible*. Apply online or Speak to a Financial Consultant at 303-340-3343 for more information. 

    *Promotion expires 06/30/2017. APR = Annual Percentage Rate. New money only. Must bring in this ad to receive promotional rate. Consult your tax adviser regarding potential tax savings. 1.99% APR introductory rate valid as of 4/1/2017 and locked until 12/31/2017, then set at the Wall Street Journal (WSJ) Prime Rate plus or minus a margin, adjusted monthly. Regular Home Equity Loan APR may be adjusted based on credit qualifications, including verification of income, collateral value, occupancy status and credit worthiness with a floor of 3.50% and a ceiling of 18.00%. Property and/or flood insurance may be required. Finance charges and closing costs may apply. Nothing herein is or should be interpreted as an offer or commitment to lend. Offer, rates, terms, and conditions subject to change at any time. Other restrictions may apply, including membership eligibility. Please enter HELOCpromo17 as promo code when applying online.  Fitzsimons Credit Union is an equal housing lender, NMLS# 459085. Must be a Fitzsimons Credit Union member to participate. To become a member-partner at Fitzsimons Credit Union you must meet at least one of the following criteria: live, work, worship or attend school in Aurora, Watkins, Bennett, Strasburg or eastern Centennial; be active or retired military; be a family member of those who meet the above criteria; or you or a family member work for any of our Select Employer Groups (SEGs). A minimum opening share (savings) deposit of $5 and New Member fee of $5 are required. Federally Insured by NCUA.


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