Buying a Home in Retirement…by George Miller

    Buying a House in Retirement: Rights and Challenges for Senior Homebuyers

    Are you thinking about buying a house now that you’re retired? Maybe you’re planning a senior downsize, moving closer to family, or even becoming a first-time homeowner in retirement. Whatever your reasons, you should know that it is possible to buy a house when you’re no longer working. However, there are some challenges to be aware of.
    Pros and Cons of Buying a Home in Cash
    Paying cash for a home saves on closing costs, eliminates mortgage payments in retirement, and makes you a more competitive buyer. However, paying cash isn’t all good news: When you buy a home in cash, you tie up money in an illiquid asset. That’s fine if you’ve already saved more than enough money for retirement, but if you might need that money to pay for healthcare or long-term care, you’re better off getting a mortgage and keeping your cash liquid.

    Getting a mortgage may be wise even if you can afford to pay cash. While you’ll pay interest on a mortgage, the interest rate may be lower than the return you could earn on other investments. You’ll also lose out on the mortgage interest tax deduction. If you’re thinking about paying cash for your home, talk to a financial advisor first to make sure it’s the right choice for your money.
    Getting a Mortgage in Retirement:
    Lenders can’t deny a mortgage to anyone based on age, which means you can borrow for a home whether you’re 35 or 85. However, lenders do want proof that you have an adequate debt-to-income ratio, which can be hard to achieve when you no longer have a salary.

    Luckily, retirees can include Social Security income, 401(k) and IRA distributions, and other income sources when qualifying for a mortgage. However, there is a catch: Lenders like Fannie Mae only count income that’s “stable, predictable, and likely to continue.” When it comes to exhaustible resources like retirement accounts, lenders want proof the income will continue for at least three years. Mass Mutual explains lending requirements for retirees more in-depth.

    Now that you know what counts as income, you can calculate your debt-to-income ratio to see if you meet lenders’ standards. While a lower debt-to-income ratio is always better, some lenders work with buyers who have higher ratios, so don’t be afraid to shop around.
    Finding an Age-Friendly Home:
    For many seniors, the challenge isn’t paying for a home — it’s finding a home worth buying. That’s not to say there aren’t fantastic homes on the market! However, many homes aren’t designed for the needs of people with mobility problems. Since senior buyers are looking for a house they can live in for years to come, age-friendly features like step-free entrances and accessible bathrooms are important even if they’re not needed today.

    Age-friendly features are more common in new homes than older housing stock. Features like first-floor master bedrooms, wide doorways and hallways, and open-concept rooms are easier to find in today’s homes, limiting the amount of remodeling that’s needed. However, you should make room in your budget for aging-in-place modifications, as even the most modern home may need some changes. As long as a house only needs minor updates like installing slip-resistant flooring and lever door handles, remodeling for accessibility can be quite affordable.

    Moving in retirement is bittersweet. On one hand, you have to say goodbye to the family home you’ve loved for years. On the other, you get to age gracefully in a house that’s suited to your needs — and maybe give your finances a boost along the way. If you’re thinking about buying a home in retirement and need guidance, reach out for help finding your ideal age-friendly home.

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