Does buying a home make sense for me now?
Buying your first home is a common goal for many working millennials, especially as incomes tend to rise in your thirties. And it’s understandably a source of pride and accomplishment when it happens. But what about taking out a mortgage for retirees?
If retirement is on the horizon for you, you may be considering a transition from owning to renting. It’s typically a time when you need less living space than you have, so downsizing makes sense. But that doesn’t necessarily limit your options to moving into an apartment. With retirees (those age 65+) representing 17% of the country’s homebuyers, here’s why it may be the perfect time to call a loan officer rather than a landlord.
Have we mentioned rates are low?
Maybe it’s been a while since you bought a home and you haven’t noticed mortgage rates are still near historic lows. The low cost of borrowing makes ownership a very affordable option.
You don’t need to compromise
There are definite lifestyle benefits associated with homeownership, and you’ve likely grown accustomed to a few. Some may be harder to give up than others. For example, if a large living space is important to you, then your version of downsizing may be shifting from 4 bedrooms with 2.5 baths to 3 bedrooms with 1.5 baths. In this case, owning may be the way to go.
Looking for a lot of character in your living space? It may be possible to find a rental with vaulted ceilings, hardwood floors, and board and batten entryways, but high-end architectural details are more common in homes for sale than in leased apartments.
No landlord, no problem
Let’s be honest. If you’ve lived in your own home for a while—perhaps decades—it’s not always easy to give up the freedom of doing what you want with it. Having to answer to someone as you approach retirement isn’t exactly ideal. While renting, you are at the mercy of the landlord, which means restrictions to the property are inevitable. Want to paint a room? Cut down a tree? Adopt a pet? These are just a few things you’ll have to take up with your landlord first. If you choose to buy a home, you have full autonomy. Are you willing to give that up?
It may be the better deal
While it seems counterintuitive, mortgages in retirement may cost folks less in the long run. Whether this is true for you is typically dependent on two factors: where you’re living and how long you plan to stay. Even if you want to retire in a major city with access to high quality healthcare, public transportation, and a variety of cultural opportunities, renting may not necessarily your best option. There are flexible terms on home loans including 10, 15, or 20-year fixed rate loans that may be a good fit for your situation. Bottom line: it pays to crunch the numbers.
Use the proceeds from selling the family homestead
Consider this possible scenario: you’ve lived in your home for 25 years, and now that your children are grown, you and your spouse want to downsize. You probably have a decent amount of equity—perhaps even full ownership. If that’s the case, you can use that equity, upon the sale of your current home, to purchase your next. And while paying cash for your next home may be feasible, you may opt for a home loan instead, saving your cash for travel and investing.
Pride of homeownership
Obviously, there is a great sense of satisfaction in owning a home regardless of your age or stage of life. This may be especially true if you plan to leave your home to your children or other family members. Bequeathing your home to your loved ones can rival the satisfaction of becoming a homeowner in the first place.
Choosing to purchase a home as you transition to this life stage offers a lot of lifestyle benefits. And depending on your situation, it could also provide some financial benefits as well.
Ditech is not a financial advisor and the ideas outlined above are for informational purposes only. They are not intended as investment or financial advice and should not be construed as such. Consult a financial advisor before making decisions regarding important personal financial matters, and consult a tax advisor regarding the deductibility of interest and tax implications.