A Second Home, a Retirement Haven

Physician's Money Digest, June 2007, Volume 14, Issue 6

Bottomline Secrets

Real estate prices have dropped overthe past couple of years and it might be anopportune time to shop around for a secondhome—a potential place to retire.However, finding the extra cash to delveinto the real estate market may provedaunting. In order to maximize youroptions, an article in suggests that you forego your life insuranceif your children are financially independentand you have accumulated anadequate retirement fund for yourspouse/life partner. You could then use thefreed-up premium money to put towardupkeeping a second residence.

You must then decide whether to takeout a home equity loan if you have accumulatedenough equity to finance yoursecond home or refinance your mortgageon your existing home. Your primary residencecan eventually be sold and the proceedscan go to repay your second mortgage.Plus, if you have lived in your primaryresidence for at least 2 of the previous 5years, you will be able to shield your profitfrom tax—up to $250,000 in capitalgains on the sale ($500,000 if you aremarried).