Guest post by Jim Vogel, ElderAction.org
With retirement comes a whole new way of looking at life. While you think about how best to stay busy and work through getting that bucket list pared down, you also need to think about where you are going to live.
Many seniors downsize, going from their old, big house to a new, smaller one. That’s because you don’t need as much room as you did before, but it also makes financial sense. Why pay the bills for a large house when you don’t use much of it?
But if you’re moving to make it easier on your retirement budget, there’s another question you have to think about: Should you rent or buy your new home?
Why Renting Might Not Be A Good Idea
Some seniors consider renting a house once they’ve sold their old one, but that might not be the best option for everyone. If you own your home, downsizing into a rental property will hurt your retirement budget. What are you getting out of the deal? When renting, all of your money goes to the folks who own that property. Plus, the move itself costs money. Your moving-related expenses may include the cost of supplies, professional movers, and fuel during your travel to your new residence. Is it really worth it to pay all of these charges for a place you aren’t going to own?
What can make that sting more is how rent prices are predicted to go up by around 5% each year. Five percent might not sound like a lot, but if you’re paying $1000 per month to rent a house now, you’ll be paying $1275 per month in just five years.
In addition, you won’t own your home anymore. If the rental company goes out of business or decides they want to convert the place to condominiums, you could have only a month or two to move out. At this time of your life, such instability and uncertainty can be a problem.
Buying A New Home Makes More Sense
Then why not just stay in your old house? There are several reasons why staying might not work either.
Chances are, you bought your current house when you were younger. You had different priorities back then. That’s why you’re looking to downsize in the first place — what made sense to buy back then doesn’t make sense to own right now. Plus, you need to consider how your strength and health will be affected by staying there. For example, if your home has a long stairway up to the bedrooms, will that become a problem in a few years?
You might want to look into extended care options as well. People who work for these companies can come by your home to run a few errands for you, or just check in and see how you are doing. One of the big problems with getting older is loneliness, so buying a property in a retirement community is something to consider, as well.
Paying For That New Home
There is a unique solution to the financial pressure of buying a new home as a senior: the FHA reverse mortgage program. Also called the Home Equity Conversion Mortgage (HECM), this allows you to earn money each month based on your current home’s equity. The US government has a special program for seniors. In fact, one of the requirements is that you are at least 62 years old.
If you are truly downsizing, then you might be able to outright buy your new home by selling your old one. The loss of value from the housing bubble has begun to reverse, and many homes are back to increasing in value each year. Contact a real estate agent to determine the current value of your home, then find a new one that costs less. Since you’ll probably be looking for a smaller home, you should easily be able to find a less expensive one.
Yes, You CAN Buy A New Home As A Senior
Just because you’re not as young as you used to be doesn’t mean you can’t purchase a new home. Check your finances, speak to a real estate agent, and soon you could be living in your brand new home.
ABOUT JIM VOGEL
Jim Vogel, co-founder of ElderAction, is passionate about promoting senior health and safety. He enjoys sharing valuable information with seniors and their caregivers.