If you’re buying a home after your retirement, it’s important to understand all the aspects of the purchase. From securing a mortgage to finding perfect homes, you’ll notice that there are a few changes. Read on to know more about how to get a mortgage and find your perfect home.
Buying a home after retirement may be a challenging task, especially if you have to take out a mortgage. Such an undertaking can significantly influence your financial situation. You must, therefore, consider several factors before purchasing a retirement home for yourself.
Many mortgage lenders are apprehensive to give out loans to retired individuals due to fear of defaults. However, there are many who will, as well. If you can show that you can pay the money back, getting a loan shouldn’t be an issue.
In this article, we are going to look at some of the things to consider when purchasing a house after retirement and also at how you can get a mortgage for your dream home.
6 Factors to Consider
1. The House's Location
The location of your retirement home plays a significant role in your lifestyle. Usually, aging people prefer living close to families and friends. Factors like climate, health facilities, and house safety are also worth considering before purchasing a house.
2. The Cost of the House
The most important thing to consider here is, obviously, your financial condition. Take out a mortgage that you can easily repay. Also, if you think that you might not be able to repay the loan entirely and might need some help, the best thing to do is consult with your family.
If you have children, will they be able to help out? If they can and are willing to, it’s always best to have a completely honest and straightforward talk about finances before you take out that mortgage.
3. Your Current Home's Equity
The best way to take out a mortgage is by avoiding it in the first place. Before you go ahead and apply for a loan, check if you have enough equity in your old home.
Your current home equity can help you purchase a new house after retirement. With enough equity, you may be able to buy the house without taking out a mortgage.
4. Future Maintenance Costs
When buying a house, it’s important to not just arrange money for the purchase, but also for other costs, like maintenance. If a house is rather old, there will be things that will go wrong and you will have to bear those expenses.
So, when you’re on the hunt for houses, make sure that you buy a relatively new one.
5. Home Security
As a senior, your house can be vulnerable to frequent break-ins. Security should be a major priority.
Try and locate houses that have established security systems to mitigate security risks. Some of the common security features that you should be looking for include CCTV cameras, a gate-house, and security alarm systems.
6. Your Household Budget
Before purchasing a home for your retirement, you must evaluate your expected income and expenses after retirement. You will get to know how much you will always need to take care of your needs and the amount to pay off your mortgage.
Always make sure that you have enough for yourself after paying your monthly installment. This way, you won’t sacrifice your quality of life. You should also consider these things retirees look for in a new home.
Buying a House With a Mortgage After Retirement
When purchasing a retirement home, many older people think that they cannot be eligible for mortgages. However, you can still get a mortgage rather easily after retirement. The federal Equal Credit Opportunity Act prevents lenders from denying retired people home loans.
Of course, you have to qualify for these loans like any other person. Here are a few things that lenders look at before approving a loan.
Evaluating Other Sources of Income
Lenders will always require proof of source of income before offering you a mortgage. But if you are retired, the lender will have to check other alternative sources of income such as property investments, social security payments, and retirement benefits, pension, and any other monthly income.
Evaluating the Value of Financial Assets
You can still qualify for a mortgage at retirement if you have enough investments that can act as your source of income. The asset depletion technique aims at evaluating the current value of your assets.
After deducting the closing costs and down payments, the lender divides 70% of the remaining amount by 360 months to find your monthly income.
Mortgage Term After Retirement
Most homeowners buying homes for the first time prefer taking out 30-year mortgages to make low monthly payments. But if you are retired, this changes drastically given that lenders aren’t comfortable with such time periods.
Most lenders prefer to give a 10-15 year mortgage. However, this isn’t such a bad thing if you consider the fact that you’ll have to pay much less interest.
Before borrowing money for buying a retirement house, you should consult a mortgage broker to help you choose the best lender. Some mortgage lenders provide their services online and offline. Mortgage brokers know how to find the best lenders for your particular situation.
Finding an Experienced Real Estate Agent
Once you’re approved for a mortgage, it’s crucial that you hire an experienced local real estate agent. As discussed earlier, there are specific features you need in a home if you’re buying after retirement.
Looking for homes that check all the boxes isn’t easy. An expert local real estate agent can help you out here. They know what to look for and they know how to get it for a good price. Real estate agents will also help you with all the paperwork and negotiations involved.
One way to hire an experienced local real estate agent is by getting in touch with a Clever Partner Agent. They are full-service agents who work for a flat fee of 1.5% ($3,000 minimum).
Clever only partners with the very best agents in any given area. This way, you can rest assured that the best in the business are representing you.