For seniors who are looking to buy a new home, here are some valuable tips and considerations.
Some seniors buy a new home because their current location isn’t ideal. Perhaps their neighborhood is too loud or busy, too far away from family and friends, or too far from conveniences like restaurants or doctors’ offices. Some seniors buy a new home because they’ve always dreamed of living in a specific city or because they want to own instead of rent. Regardless of the reason, when purchasing a new home as a senior, there are some important financial considerations you should make. You’ll also want to find ways to make the move easier.
Before you jump into a mortgage, there are some financial considerations you should make. First, weigh the pros and cons of renting versus buying. Renting carries the risk that one day a landlord will sell the place, and you could be forced to move out. Also, unlike a fixed-rate mortgage, rent costs can rise every year.
On the other hand, while homeownership often results in a lower monthly payment, that isn’t always the case, so you must be vigilant in finding out what your exact financing options are. Don’t forget that homeownership also comes with additional expenses, such as property taxes and homeowner’s insurance. Also, expensive repairs and upgrades can pop up unexpectedly, especially in older homes. This should all be factored into your budget so you aren’t caught in a financial bind later on down the road.
Applying for a Loan
While federal law prohibits lenders from denying your approval for a loan based on your age, lenders will look back two years to establish your income and credit history. They’ll also evaluate the likelihood that you’ll continue to make the same level of income for the next three years. If you’re in retirement or planning to retire within three years, a lender will evaluate earnings from Social Security, retirement accounts, dividends on investments, and other applicable sources.
If you’re not yet retired, keep in mind that income can change in retirement, so what may be reasonable now can become unaffordable in the future. Even if you’re certain about your retirement cash flow, understand that taking on a mortgage will affect it. Most homeowners choose a 30-year mortgage, which has lower payments, but it means you’re responsible for monthly payments for the foreseeable future. Sometimes a 15-year mortgage can make more sense. Of course, if you’re moving from a big city to a suburban home, the move may decrease your monthly living expenses. It all depends on your individual circumstances, but you should opt for a mortgage payment that doesn’t hamper your ability to afford other retirement wants and needs.
Making the Move Easier
For starters, the best way to ease stress during a move is to make a plan. Allow enough time so that you don’t feel rushed. You’ll need time to sort through your stuff and pack it up in an organized way. When sorting and packing, it’s easier to start small, like going through desk drawers, to get the ball rolling. If possible, obtain a floor plan or photos of the new home to determine how much of your stuff will fit and where it will go. This is especially helpful if you’re downsizing significantly.
Sorting, packing, and unpacking are time consuming, stressful, and physically demanding. If you aren’t near loved ones who can help (or if your family is prone to bickering), consider enlisting local professionals to get the job done. They can help you plan out the move in advance, leaving you to stand back and only supervise when moving day arrives.
The decision to move is always difficult, but moving as a senior who’s close to retirement or in retirement can add even more stress. Consult a financial planner to discuss your options in detail, and don’t rush into any decisions before you’re ready. With the right planning, you’ll have the right mortgage and a new home you can enjoy for years to come.
This post is written by guest blogger Jim Vogel. You can visit his website here.