Buying A New Home As A Senior: Financial Considerations To Take Into Account
By Jim Vogel
When senior citizens are facing a major move in their older years, there can be a number of factors to consider. Some seniors look to buy their dream home when they are ready to retire while others look at downsizing to make it easier to handle their living situation. Many older adults focus on aging in place while others need to consider moving someplace where they can get substantial assistance. In every moving scenario, there are financial issues to consider.
Seniors need to be cautious about sinking too much financially into a new home
MarketWatch cautions seniors to think about their financing decisions when purchasing a new home later in life. Some seniors have a significant amount of equity in a home they are leaving, so it is easy to put down a substantial down payment in order to ensure they have a low monthly payment. However, for some people, doing a minimal down payment and utilizing the rest of the prior home's equity to ensure they have adequate cash resources for living expenses makes more sense.
Some financial experts caution against taking out a new mortgage to buy a home in your later years. At the very least, for many seniors, decisions need to be made about where to downsize or cut back elsewhere in order to ensure that they can financially handle a new mortgage. Another potential issue is when seniors take on a mortgage, or a refinance, to help their kids with expenses, as this can lead to significant financial issues.
Alternatives to buying a home may be worth considering
In some scenarios, renting a place may make more financial sense than buying. According to Trulia, this is especially the case if retirees are not concerned about having a lot of equity in their home at the point that they pass away. The answer to whether it makes more sense to rent or buy as a senior depends a bit on the location and market, and this is where a financial advisor and realtor can be of significant assistance.
It can be a difficult adjustment for some older people to leave a house and head into a rental, but this is an option that can provide some flexibility, especially if health issues could become a concern and necessitate a different kind of move. There can be some significant costs involved in buying, such as realtor fees, upkeep, and taxes, and the financial commitment may be simpler to keep up with in a rental instead.
Creative financing options do exist for seniors ready to buy a new home
For some seniors, a reverse mortgage may be the way to go. HUD explains that a reverse mortgage allows seniors to access the equity in their house via this loan, and the loan is paid back once the senior no longer uses the home as their residence. However, this type of loan may not be a fit for those who live with someone else, who may not stay in the home long, or for those who would have trouble keeping up with the costs of maintenance, homeowners insurance, or property taxes.
In terms of obtaining for a mortgage as a senior, pensions, investments, and Social Security benefits can be utilized to qualify financially. However, those living on a moderate fixed income should be cautious about taking on too high a payment. In addition, there are some grants and loans available that are specially tailored to seniors, especially if they are first-time home buyers or low-to-moderate households, notes Sapling.
Buying a new home as a senior can be challenging. Continuing to own a home is important to many seniors who are focused on aging in place, but difficult decisions need to be made as the process moves forward. Financing options are available for older adults anxious to buy a new home, but there are additional options or creative solutions available as well for those who want to make sure that they do not tie up the money they need in their later years in a mortgage.
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