If you’re like many retirees or soon-to-be retirees, you may be looking to downsize your home or even relocate altogether to a more desirable location to spend your Golden Years. But buying a home after retirement requires a different approach than when you may have purchased a property in the past. To get a better idea of how to buy a home after you retire, let’s take a look at some factors you should look at before purchasing your next home.
Things to consider
Obtaining a mortgage
A common misconception when it comes to borrowing a mortgage is that you cannot qualify if you do not have a paycheck coming in after retirement. However, retirees can use a method called “drawdown on assets” to show they have an income. As long as the retiree is at least 59 ½, withdrawals from retirement accounts such as a 401(k) or IRA, it counts as qualifying income.
Another method, known as “asset depletion,” would be a good option for borrowers with a lot of investments. When we use this method for income verification, we calculate a borrower’s total assets divided by a set number of months (typically the loan term) to determine how much monthly income the borrower has to make their mortgage payments.
It’s best to speak with your OVM Financial loan officer to determine which option would be best for your financial situation, but there are options for retirees!
Choosing a location
There are a few things to think about when choosing the location of your new property. Firstly, it’s important to consider the monetary aspects. Costs such as property tax rates and that mortgage rates will vary depending on which state the home is in and if it is in an urban or rural area.
Next, you should look at other variables like if you can handle the weather in the location you’re looking in, or if you would be better off moving somewhere that would better fit your weather needs. For example, if you do not want to have to shovel snow in the winter, consider going more south.
Finally, when it comes to location, you should consider how close your home is to necessities such as grocery stores, hospitals, or pharmacies. Plus, how close is the home to recreational areas you’d like to visit often, such as restaurants, shopping malls, or fitness centers?
Physical considerations for the home
If you’re looking for an abode to spend your retirement years in, it’s important to consider what works best for your lifestyle. Features like stairs or maintenance for a large yard can become harder to accomplish over the years. Take a look at the physical considerations of the home to have peace of mind as the years go by. If you’re worried about stairs, consider single-level options, and if you want all of the maintenance taken care of, a condo may be a great option.
Something that can get overlooked easily is the tax implications of your new property. You should consider items like property, sales, and real estate taxes before purchasing your new home. An additional item that you should take a look at is how your income will be taxed during this time. Income tax laws can vary by state, so if you are looking to relocate to a different state, you should first look into the tax laws, so you know what to expect.
Things to avoid
- Purchasing a home based on your current income instead of your estimated retirement income.
- Tieing up all of your retirement income in a home.
- Buying a home based only on location or cosmetic appeal — the home should fit your lifestyle long-term.
- Dismissing the resale value of the home — you still want to make a return on your investment down the line.
The bottom line
You’ve waited years for retirement and it’s important you spend these years in the best way possible. If that includes downsizing or relocating, you’ll want to ensure that your new home is the best fit for your needs and lifestyle, in addition to being able to afford it on a fixed income.
As always, we’re here to answer any questions you have and help guide you through the process, whether it’s single-family or a condo! Give us a call or start your application today.