How To Buy a House When You’re Retired
People entering into retirement may consider purchasing a home once they do so. However, most retirees are on a fixed income in their retirement years and must be careful when considering using their savings for a major purchase.
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Thinking about how to buy a house when retired? Here’s what you need to know about financing options that may be available to you and whether or not it is worth the investment.
Financing a Home Purchase in Retirement. What’s the best way to finance a home purchased in your retirement years? Retirees may consider looking into the following options. As always, remember each retiree’s financial situation is different and the option you chose will ultimately be dependent on your unique circumstances.
Explore Available Education Resources. Before committing yourself to a specific type of financing, Scott Berens, CEO of Balsamo Homes, recommends reviewing resources designed to help seniors find homes. Here are a few resources to check out:
AARP HomeFit Guide. The AARP Foundation offers a free publication called HomeFit. This helps seniors not only find a home meeting their needs and budget, it also includes a checklist of things to consider when buying a house, and tips for financing, moving and more.
The National Council on Aging. Berens said they have housing counselors available who can help seniors with everything from finding affordable housing to negotiating a mortgage.
Sell Your Existing Home. One of the most unique challenges of retirement is transitioning to life on a fixed income. Retirees looking to buy a home may wonder how they can qualify for a mortgage and if they will be able to make these monthly payments.
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“Take a close look at your finances,” Berens recommends. “If you have any equity in your current home, you may be able to use it as a down payment on your next home.”
Once you’ve figured out how much money you have available for a down payment, Berens said you can begin shopping for homes in your price range. Some retirees may even qualify for special programs that offer lower interest rates and reduced monthly payments.
Reverse Mortgage. Boyd Rudy, associate broker at Dwellings Michigan, said one of the best ways to finance a home purchased in retirement is through a reverse mortgage. This option is available to seniors age 62 and older and lets you use your existing home as collateral.
“This type of loan allows you to cash out equity in your home without having to make monthly payments,” said Rudy.
The downside of a reverse mortgage is it can be expensive. Fees and interest rates can add up, potentially eating into your home equity. There are also strict rules surrounding reverse mortgages to be aware of. Retirees may consider looking into finding lenders with expertise in these mortgages before pursuing the option further.
Check For Senior Discounts.Depending on where you live, you might be eligible for a discount when purchasing a home.
Christina McCollum, Washington regional manager for Churchill Mortgage, said most counties offer a senior discount on property taxes. If you’re struggling with mortgage affordability issues as a retiree, this might be worth looking into.
Look Into Affordable Housing Options. What if you’d rather not buy a new house because it has the potential to be quite big, mostly empty and may require expensive financial costs such as repairs and maintenance?
Retirees can always stay at their current residence or check out affordable housing options, per McCollum’s recommendation. Retirees living on limited, fixed incomes who like the area they live in may check out senior living or retirement communities.
Borrow on Margin. If you do not have enough money with your mortgage loans to finance a house, David Tully, Realtor at eXp Realty, said you can borrow money from a brokerage firm against the value of your portfolio.
“This is called borrowing on margin,” said Tully. “You can use the money to purchase securities or something entirely unrelated to investing. The interest rate of such loans is less compared to other types of borrowed money.”
Ultimately, the decision to purchase or not to purchase a home during retirement depends on your personal circumstances. Those who do their homework and consult with financial advisers well in advance, however, will be in a good position to make an informed decision that best meets their needs.
CONTRIBUTOR.Heather Taylor. GOBankingRates. Call Scott Underwood with more than a decade closing Reverse Mortgage purchases here from Birmingham to Huntsville to Mopbile, Alabama and everywhere in between. (205-908-2993). Find out how to buy a house when you’re retired. Weather you want to upsize or downsize from your last home; you can put money profitted from the sale of the last home to go with the money supplied by the Reverse Mortgage to buy a house without any mortgage payments.
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