While you may not immediately associate retirement with home ownership, buying a home after age 60 can be both thrilling and financially savvy. Instead of looking for highly rated school districts, you can find the ideal combination of convenience, affordability, and proximity to them that matters most. That said, no matter your circumstances, buying a home as you approach retirement age can have a lasting impact on your retirement finances. Here’s what you should consider before buying a home after age 60.
A financial advisor can help you figure out when buying a home makes sense for your financial plans.
The Advantages of Buying a Home After Age 60
Buying a house after the age of 60 can be a wise financial move. Here are four general benefits:
Opportunity to build equity. Wherever you are, equity is a powerful financial tool. When your home’s value rises above the amount remaining on your mortgage, you’re building equity. For example, if you own a $300,000 home and your mortgage balance is $200,000, you have $100,000 of equity.
You can use equity to pay for various needs, such as home repairs, paying off debt, or paying for a vacation. Also, the more equity you have, the more potential profit you can make by selling your home. Therefore, building equity gives you financial leverage in a variety of situations.
Tax relief. Home ownership means tax breaks! Depending on your circumstances, you may be able to take advantage of the following:
Mortgage interest deduction. If you bought your home before December 16, 2017, you could likely deduct $1 million from the interest paid on your mortgage if you married and filed together. If you become a homeowner after that date, you can deduct $750,000 instead (and halve that limit if you’re separately married or single).
State and local tax deductions (SALT). You can deduct up to $10,000 of state and local property taxes each year (half that amount if you are separately married or single).
Interest in home improvement. As a home owner, you can borrow against your equity through a home equity loan or a home equity line of credit (HELOC) to pay for home improvements. Plus, you can deduct interest payments on your taxes. This deduction only applies when you use this financial product to pay for home improvements.
Security. Housing is currently in high demand and tenants can lose their homes to the whims of landlords or economic instability. On the other hand, if you have a fixed-rate mortgage, your housing payments won’t change after you move out. As a result, home ownership gives you a solid financial footing and a consistent monthly housing bill that won’t spike with the market. fluctuation.
Set an inheritance to pass on to your heirs. A well-maintained home is an asset and buying one after age 60 means decades of home ownership for you and future generations. By leaving your home to your heirs, you can give them a financial foundation to build on. Housing is usually the biggest monthly expense for a family and spending it on your children or grandchildren is a great benefit.
Cons of Buying a Home After 60
While home ownership after age 60 can bring many positives, here are three common downsides before signing the dotted line on closing day:
Maintenance and repair costs. Home is both an asset and a responsibility. Once you move into a new home, you inherit a seemingly limitless amount of chores and chores: mowing the lawn, cleaning out the gutters, and getting rid of pests, to name a few. Plus, as you get older, you may not be able to climb stairs or spend hours raking leaves, which means you’ll end up paying for these services.
In other words, home ownership brings both physical and financial demands to maintain your property. Therefore, saving money for maintenance is very important. It is recommended to budget 1% to 4% of your home’s value for annual repairs and maintenance. For example, you might own a $250,000 house. In this case, you’d budget $2,500 to $10,000, depending on your situation.
Closing costs. Buying a home is exciting, but closing days can drain your savings. For example, you will pay for loan origination, home inspection, and title insurance during the home buying process. As a result, you can expect to pay between 3% and 6% of your loan balance as a closing fee. Plus, these expenses are separate from your down payment, meaning you may need tens of thousands of dollars to buy a home.
Lack of flexibility when circumstances change. A significant benefit of renting is the lack of commitment. For example, if you want to pick up and move across the country as a tenant, you wait for your lease to expire (or cancel early if you can afford it) and leave your rental apartment or house. Once you hand over the keys it’s a clean break.
On the other hand, home ownership makes it more challenging to uproot your roots at a moment’s notice. Selling or renting your home takes time, effort and more money. Therefore, if you like to move around a lot, home ownership can be a hindrance instead of a blessing.
Key Considerations When Buying a Home After Age 60
Buying a home after age 60 is a serious financial commitment. Here are three important points to keep in mind when making a decision:
Housing timeline. If you envision spending the next 20 years in your next home, home ownership is likely a very good move. However, as the number of years you will live in the home decreases, the benefits of home ownership diminish. In particular, living in the home for less than five years after purchase will likely negate the financial benefits of a tax break or an increase in the value of the home. As a result, it’s a good idea to ask yourself what your plans are for the next decade or two. If it involves multiple moves, the home may be more of a liability than an asset.
Evaluating the real estate market. Your area’s real estate market is unique from the rest of the state or states. For example, urban areas can be more affordable for renters than for homeowners. On the other hand, you may find an affordable plot of land in the countryside that is perfect for you. Therefore, it is worth considering your preferences for your local housing market. A high supply of homes and low interest rates can help buy affordable homes.
Identify the home that’s right for you. After age 60, you may want to spend your time on something other than mowing the lawn or shoveling snow. So it’s very important to ask yourself what type of home is realistic to own. Acres of land may be out of the question unless you can afford some help to maintain it. On the other hand, a condo with built-in lawn care can provide comfort and convenience.
Is Buying a Home After 60 a Good Idea?
Buying a home after age 60 makes sense if you have sufficient monthly income and find affordable housing. Also, if you are physically able to maintain the home or can pay for extra help, home ownership will be less of a burden. Finally, if you have family that you want to leave home, you can enjoy decades of living in a home that will one day belong to your children and grandchildren.
On the other hand, buying a house after the age of 60 can cost you financially. For example, if you plan to move in five years or less, the cost of owning the home will outweigh the financial gains. In addition, you will have to sell or rent your home when you want to move. As a result, home ownership can come with responsibilities that you may not want to shoulder, especially if you are retired and want to travel.
The main thing is
Buying a house after age 60 can be a blessing or a curse, depending on your circumstances. While you can gain tax advantages and leave an inheritance for your family, owning a home is a commitment with definite financial implications. Therefore, evaluating your financial capabilities and your plans for the next few decades can help you decide whether it is better to leave your roots as a homeowner or become a less responsible renter.
Tips for Buying a Home After 60 Years
Home ownership affects your monthly budget and your overall financial plan. A financial advisor can help you ensure that buying a home makes sense for your financial plans. SmartAsset’s free tool matches you with up to three verified financial advisors serving your area, and you can interview your matched advisors free of charge to decide which one is right for you. If you’re ready to find an advisor who can help you reach your financial goals, get started now.
Pre-approval from your lender is essential for making a serious offer on a home. Without prior approval, the seller doesn’t know if you have the necessary financial backing to buy a home. So, before browsing for homes, it’s best to find a lender and submit your financial information (tax returns, W-2s, pay stubs, bank statements, etc.). Once you’ve received approval, you can make your bid with confidence.
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