Purchasing a Home After Retirement

[EasterlingK1104]

We lived in South Central Texas and the heat and water shortage finally caused us to start looking for a new place to live.  We are both retired for some time with very good pensions, social security, and military healthcare for life.  We didn't have anything to keep us there so we pulled out a map and started looking for a state where we wouldn't have snow, near our friends on the East Coast and not far enough South that we would have the high temperatures.  Without ever having been there, we picked South Carolina near Hilton Head Island. 

We flew out to check the area and loved it.  We purchased in a development and had the house built that we wanted.  It cost about $150K more than what we sold our house for.  We chose a 15 year fixed mortgage.  The payment was $2.2K but we wanted to pay it off sooner so we've been paying $4.2K per month.  We'll have it paid in another couple of years.

We have learned two things with this move.  First, make sure your payment doesn't cramp your cash flow.  In a couple of cases, we have not had the cash flow to take advantage of some deals.  Of course we could have held back the extra $2K but my wife is totally fixated on paying off the mortgage.  Second, check out the active senior living communities.  After we had purchased this home we learned of the one closest to us.  We volunteer several times a year and we usually are volunteering with people from the community.  I think if we had thought to check that out, we would have purchased a home in that community.  Perhaps in a couple of years we will sell and move to the active senior living community.

[RonMesnard]

Why the loan?  If you think you might be short, tack more on your mortgage. They are always much lower than any other kind of loan.  After a mortgage your crediit score might dip for a few years so take it while the getting is good.  Enough of my envestments are liquid enough to take care of any needs I might have. My account always has that kind of cash to take advantage of a bargin. 

[RonMesnard]

I agree.  I could pay off my house but then I lose one of my last tax lop holes.  Since my interest is a rightoff and I made almost 5 times on my investement than at my record low mortgage rate it would be pure stupidity to pay off the mortgage.  We will probably buy a winter home in the FL keys with another mortgague.  It isn't hard to get a mortague with a large unearned income and a healthy down payment. 

[ttryu]

From the experience of my parents who used to live in a split-level home, it is important to find a place that is senior-friendly.  For those who are over 70, it is increasing difficult to climb stairs even it means only a couple of steps up or down.  Unfortunately, almost all the new homes built today are not friendly to seniors.  It is very costly to upgrade existing homes to accommodate needs for seniors.   Buying a house with senior requirements in mind is a good alternative as long as it does not ruin a person's financial well-being.

From my own experience as an investor, it is always a good idea to invest in rental properties as long as you do it prudently.  Cash flow must be positive and the outlook in rental market is good.  Rental property profolio could function like a growth and income asset if it is managed properly.  However, there are risks involved and these risks could be devastating to senior investors.  Local real estate markets may crash and rental demand can decrease.

[ASchell280]

We downsized to a slightly smaller home after retirement in a town in our home state. I took out a mortgage and then a slightly larger one when I added a sunroom--something I had always dreamed of. Our primary residence is in a clustered home community with a 9-hole golf course and a community pool. We don't golf, but I regularly swim in the summers. We also purchased a second home in a Western state with warmer weather in the winters and spend about 5 months there. We took out a small mortgage on that home too. The payments (Principal, Interest & Taxes) on the two homes combined are around $1500. The notion that we should be mortgage free in retirement makes no sense to me. Without the mortgage interest and property tax deductions, we would pay far more in income tax. I think renting is a good idea if that isn't an issue for you, but for us, having a place in our home state, close to lifetime friends and relatives, as well as a "snowbird home" is just what we need. When the time comes that we can no longer make the cross country trek each year...well, we'll just hunker down in the winters and stay in our home state, possibly selling our home and moving to a 55+ condo community.

[cw80575597]

We recently sold a two story home because we couldn't handle the stairs, high maintenance upkeep and yard work anymore; we started looking for a  single level home with a small yard along the lines of a patio home but quickly discovered that unless we had a single level home built we would end up buying a cookie cutter smaller house with no appeal and a larger yard than we wanted with expensive HOA fees for amenities we didnot want or would ever use in the community.  We ended up putting the proceeds from our home sale away and renting a nice apt. for now because it's easier to pick up and leave if things don't work out without having to worry about selling another house later in life which is very expensive when you take into account the yearly HOA fees, property insurance and taxes + home maintenance upkeep if something broke or needed repairing.  I think we will not buy another home and continue to rent instead because to me, non home ownership later in life = freedom without being tied to  a home we may end up selling again if it becomes too much of a burden.  I always remind myself that even though you are buying it; if the home has a mortgage, you are still pretty much renting the home from the mortgage company until it is fully paid off.       

[wilful]

Take out a new loan for the 30 k when you buy the new place. Interest rates are still low and as long as the payments on the loan do not cramp your style - go for it. For the time being - leave your investments alone. Later on - if you get tired of the payments - And you are in a good position to liquidate a small part of your investments, i.e. you have a decent gain - take the gain and payoff the loan. :-)

[retiredtraveler]

Opinion from myself and friend who has been doing real estate for several decades. You cannot view the house as an investment, regardless of what is happening now, because real estate is up-and-down, same as the stock market. Now, if you're ready to possibly take a substantial hit, should you need to sell, and the market is bad at that time, then of course, you're free to do so.

   We're (real estate guy and I) both of the opinion, and DW and I are going to do this, is to rent. We have a house, paid for, but will be difficult to maintain as we get older. We'll sell, use the proceeds to rent something (the sale should cover us for a very nice place for a lot of years).

    But, only you can determine your finances and how you wish to spend money. We're also of the opinion that we just don't want to make the effort, as we get into our 70's, to do all the work to maintaining a house, including calling others to do the work. Just too much burden for us. 

[ASTRAEA]

@pk83138016 - It really depends on how large your nest egg is, and how much of the total that $30K (and the annual income it produces) represents, as well as the rate you're getting from whatever investment you'd liquidate vs the rate being charged on the home equity loan. Also the terms of the home equity loan; fixed rate or adjustable .. and if the latter, whether you'd have it paid off before the rates went up.

I sold my home in north Jersey after I retired, and moved a little further south to the shore area .. where real estate prices were higher. I spoke to a friend in the mortgage business & my accountant, about the pros & cons of getting a small mortgage & dipping into savings, and they said that knowing me, I'd rather not have even a short-term mortgage hanging over my head, in retirement .. and they were right.

Good luck, whatever you choose to do!

[pk83138016]

We are considering selling our home, which no longer has a mortgage, and moving to a smaller city.  What we can get for this home is about $20K less than what we need for a comparable home in the new city.  I am 60, my husband is 75.  He draws Social Security and we have investments, which so far we have only used the interest on for our living expenses.  My question is, would it be worth dipping into the principle of our investments for about $30K to make up the difference in the home cost and moving expenses, or would a home equity loan make more sense?  My husband is reluctant to use the principle, but I'm wondering if it would be worth it to invest in a house.  The city we would be moving to is growing and the real estate market there seems to be booming, so a house might make a good future investment.