Once you are retired you should have most of your financial obligations behind you. Paying for a home, vehicle, and other expenses should not be a priority. Yet if you did not plan on buying a home until retirement, you should seriously take the time to contemplate whether or not this is a smart financial move before you commit to this big obligation.
As of the fourth quarter of 2013, U.S. homeownership is at 65.2 percent, according to the National Association of Realtors. With more than half of American families owning a home, don’t feel pressured to make this purchase. Your goal during retirement should be to enjoy the rest of your life comfortably, and that won’t be possible if you struggle to afford the cost of living after you purchase a home.
This does not mean you should avoid buying a home, it means you should truly figure out if it is something you are ready to commit to and can afford. There are both pros and cons to buying a home in retirement. We have outlined some of the major benefits and downfalls that come with owning a home, that way you can decide the best option for you.
Can you afford to purchase a home and still retire comfortably?
You need to figure out whether or not you can purchase a home and still retire comfortably. Having a lump sum of money put away specifically to purchase a home in retirement is ideal. But if you are buying a home with a small down payment, you may want to reconsider.
The average price of a home among the 10 most popular cities in America is $281,800, as of the last quarter of 2013. In 2014, the average worker will receive $1,294 a month from their retirement plan, while couple will get roughly $2,111. Determine how much you plan to receive a month from your retirement plan and you should have a clear indication if you can afford a home or not. Remember, other financial factors could make it difficult for you to afford a mortgage. Medical bills, other debts, and the general cost of living must be calculated.
Your best bet is to contact a financial advisor to weigh your options. An expert can calculate your retirement plan, and if buying a home in retirement is a wise decision.
Remember, once you buy a home you are committed
The downside of buying a home is that unless you can afford it, you must commit to paying down the home for several years before you can list it back on the market. Some homeowners realize a year or two after buying the property that they do not like living in it. Before purchasing a home, take some time to think about whether you feel comfortable about the neighborhood, and consider things like how close it is to the grocery store, hospital and family members.
Is a rent-to-home choice a viable option?
Rent-to-own homes can help you put money towards a home without having to commit to upfront costs immediately. Most rent-to-own homes have two or three year leases before you actually go through the process of buying the home. Two or three years is plenty of time for you to determine if a particular home is right for you.
As you near retirement, give it some serious thought before you commit to buying a house or renting. The important thing to manage your finances properly and know how much you can spend during your golden years.
Gerald is a staff writer at MyBankTracker.com. He is an expert in real estate, mortgages and credit.