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You Should Buy Your Retirement Home Before You Retire
You Should Buy Your Retirement Home Before You Retire
Planning to leave the workforce and retire in five to 10 years can seem a long ways away. Buying a retirement home now can actually pay off in the long term to capitalize on some benefits offered to homeowners. Learn five reasons to buy a home while still fully employed.
Easier Approval for Mortgage
Mortgage lenders evaluate loan applications based on debt-to-income ratio, the total monthly debt divided by gross monthly income. It is easier to qualify for a home loan while earning a steady paycheck. Waiting until retirement to apply for a mortgage can limit the size of loan which can be qualified for with lenders.
Cash Flow
Most people want to make some renovations and changes to a property once purchased. Setting a budget can help plan for the changes. A regular income is nice to have when updating or modifying a home. Working full-time can protect a person financially if major issues are uncovered. Retirement may not afford for life's inevitabilities when it comes to repair work including mold issues or water damage to a property that becomes an unexpected expense.
Get Ahead
To become debt-free in retirement, many retirees decide to rent rather than own. Becoming a homeowner has benefits if the home is bought early. Tackling mortgage debt can put a person in a position to accelerate payments while working.
Long Term Vision
One of the biggest challenges is knowing how to predict expenses in retirement. It is usually difficult to know how much money will be needed for housing. Purchasing a home provides the broader picture of what monthly expenses will look like in retirement and supports creation of a more accurate budget. The largest monthly expense in a person's budget is usually a mortgage. Knowing what payments can be will prove beneficial for long term planning.
Expand Portfolio
Financially if a person is able to carry two mortgages at the same time, it may make sense to buy the home and rent it for a few years until it is time to move. Owning a rental property can help a person retire sooner if the stream of income provides extra cash flow for the nest egg. Tax benefits can also be given for the rental property. It is best to contact the IRS to find out what benefits exist for people who rent out a property. In addition, more money in a retirement nest egg can be set aside for those changes that need to be made to the property or for emergencies.