Have you talked about moving away when you retire? Have you decided on a location? Do you know when you are going to find “the place?”
If you know the “where” part of the equation, have you started taking regular vacations to that place?
If you are planning to retire in the next five to seven years, it’s not too early to start thinking about your retirement residence.
Here are five financial and non-financial reasons why you should consider buying your retirement house before you retire, especially if you are going to have a mortgage:
1. The mortgage
It is easier to qualify for a mortgage if you are still working. For most people your income is higher before you retire so your debt-to-income ratio is more favorable. If you wait until retirement, you may be limited to a smaller mortgage size.
Interest rates are still relatively low are showing signs of moving upward. Locking in a low-interest rate mortgage now could positively impact your retirement budget.
Caution: A mortgage on a second home is more difficult to obtain. In addition to an excellent credit rating, you’ll need a down payment of 20 percent or more. A mortgage for a second home or “vacation” home usually has a better rate than a mortgage that would be used to obtain a rental or “investment” property.
Any additional real estate could expand and diversify your portfolio. If you can manage an extra mortgage payment, consider buying the house now and possibly renting it out for a few years, or even seasons.
If the house is in a location you can frequently access, consider using a service like vrbo.com(Vacation Rentals By Owner), or Airbnb.com. If the property is across the country, you might consider a long-term lease, with a local property manager to tend to your renters.
Caution: Carefully read your homeowner’s insurance policy and your mortgage note. Each one of these may have clauses that prevent you from renting the property.
3. CASH FLOW FOR REPAIRS AND UPGRADES
Unless you purchase a brand-new home or one that has been newly remodeled, you’ll probably want to make some upgrades. Your current income combined with the time prior to retirement should give you the opportunity to complete the improvements and repairs. You may be able to rent the house out for a while to accumulated the funds for the upgrades you want.
4. BUDGET PLANNING
Buying the house now will give you very accurate dollar figures for your monthly expenses in retirement. You will know your monthly housing, utilities, property taxes, and local costs.
5. LOWER STRESS
While you’re working, you might have a nagging item on your to-do list about where you’re going to live in retirement.
If you make your purchase before you quit the workforce, knock one thing off your list for some peace of mind regarding the decision. If after spending vacations at this house you find its’ not the ideal house for retirement, it might be easier for you to sell it and find a replacement while you are still employed.
If retirement means moving to a new location, give some consideration to finding that place before you retire. There is no magic answer, but you need to determine what is important to you.
IT’S A GOOD LIFE!!
Rachel Sheller,Principal Broker, Realtor, CRS, ABR, GRI, SRES,MASTERS CIRCLE, Earth Advantage Broker, Diversity Specialist-HOWNW, CSA-Certified Staging Agent, Oregon First, Washington First
Direct 503.380.9634, Email- firstname.lastname@example.org
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