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Refinancing for Retirement

Many Americans wind up relying on Social Security for most of their income after they are out of the workforce, and for many, this entails a severe decrease in their standard of living.

Many financial advisors suggest finding a source of replacement income, ideally up to 70% of what your income was before you retired. But even if you have diligently prepared for your retirement by saving and contributing to retirement accounts, unexpected hardships can take a toll and burn through these savings quickly.

One option for replacement income is to refinance your mortgage.

Advantages and Disadvantages

There are advantages and disadvantages to refinancing to prepare for your retirement.


  • You may be able to reduce your monthly payment, which can free up extra money to cover living expenses
  • If you anticipate downsizing or moving into a retirement community, lowering your monthly payments can help you save in advance of this event
  • You can potentially take a Home Equity Conversion Mortgage to use the equity you’ve built in the form of proceeds you can use to pay for living expenses.


  • Closing costs associated with refinancing may place you under financial strain and cancel out any potential savings
  • Refinancing at a lower rate can potentially lengthen the term of your loan, leaving you unable to pay it off before you pass away and unable to leave the house as an inheritance
  • Refinancing may not be the best option compared to other loan types such as HECM

Types of Loans for Retirement Income

HECM Home Loan -- The HECM proceeds from the equity in your home becomes available to you when you need it to help cover living expenses

HECM For Purchase -- You can purchase a home and get a HECM in a single transaction