How to buy a retirement home

People who are retiring may consider buying a home once they have done so. However, most retirees are on a fixed income during their retirement years and should be careful when considering using their savings for a major purchase.

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Thinking of buying a home in retirement? Here’s what you need to know about the financing options that may be available to you and whether or not it’s worth the investment.

Financing the purchase of a retirement home

What’s the best way to finance a home purchased during your retirement years? Retirees may consider considering the following options. As always, remember that every retiree’s financial situation is different and the option you choose will ultimately depend on your particular circumstances.

Explore available educational resources

Before committing to a specific type of financing, Scott Berens, CEO of Balsamo Homes, recommends reviewing resources designed to help seniors find housing. Here are some resources to check out:

  • AARP’s HomeFit Guide. The AARP Foundation offers a free publication called HomeFit. This not only helps seniors find a home that meets their needs and budget, but also includes a checklist of things to consider when buying a home, as well as tips for financing. , moving and more.
  • The National Council on Aging. Berens said he has housing counselors available who can help seniors with everything from finding affordable housing to negotiating a mortgage.

Sell ​​your existing home

One of the most unique challenges of retirement is the transition to living on a fixed income. Retirees looking to buy a home may wonder how they can qualify for a mortgage and if they will be able to make those monthly payments.

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“Look carefully at your finances,” recommends Berens. “If you have equity in your current home, you may be able to use it as a down payment on your next home.”

Once you figure out how much money you have available for a down payment, Berens said you can start buying homes in your price range. Some retirees may even qualify for special programs that offer lower interest rates and reduced monthly payments.

Reverse Mortgage

Boyd Rudy, associate broker at Dwellings Michigan, said one of the best ways to finance a home purchased in retirement is with a reverse mortgage. This option is available to people aged 62 and over and allows you to use your existing home as collateral.

“This type of loan allows you to cash out the equity in your home without having to make monthly payments,” Rudy said.

The downside of a reverse mortgage is that it can be expensive. Fees and interest rates can add up, which could undermine the equity in your property. There are also strict reverse mortgage rules to be aware of. Retirees may consider finding lenders with expertise in these mortgages before pursuing the option.

Check senior discounts

Depending on where you live, you may qualify for a discount when buying a home.

Christina McCollum, Washington regional manager for Churchill Mortgage, said most counties offer a seniors’ discount on property taxes. If you’re struggling with mortgage affordability issues as a retiree, this might be worth looking into.

Explore affordable housing options

What if you’d rather not buy a new home because it has the potential to be quite large, mostly empty, and may require expensive financial costs such as repairs and maintenance?

Retirees can still stay in their current residence or check out affordable housing options, according to McCollum’s recommendation. Retirees living on limited and fixed incomes who love the area they live in can check out senior residences or retirement communities.

Borrow on margin

If you don’t have enough money from your mortgages to finance a home, David Tully, realtor at eXp Realty, said you can borrow money from a brokerage against the value of your portfolio.

“It’s called borrowing on margin,” Tully said. “You can use the money to buy securities or something unrelated to investing. The interest rate on these loans is lower than other types of borrowed money.

Ultimately, the decision to buy or not to buy a home in retirement depends on your personal circumstances. However, those who do their homework and consult financial advisors well in advance will be in a good position to make an informed decision that best suits their needs.

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This article originally appeared on How to Buy a Home in Retirement

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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