How to Handle Buying a Home in Retirement

“Is it better to try to sell my house fast now and then buy a property, or is it better to try and buy a property now only to sell the current house I’m living on later once I’m retired?”

 

That is the question that we’re going to try and answer today. 

 

As you near retirement age, you’ve no doubt earned yourself what’s known as the “old people credit score”, where you have a near-perfect credit score in the high 800s. Paired with the fact that you might find yourself with a huge chunk of cash by the time you retire, and it’s quite tempting to spend it on something expensive, like real estate. 

 

Which brings us the question, should you buy now and sell later, or try to sell first and then buy a property?

Why Buying Before Retiring is a Good Choice

Buying before retiring is a good choice if your finances are stable. Why? Because once you’ve retired, you’ll lose your biggest leverage of them all — your job. 

 

Your job, especially if you’ve held it for years if not decades, is your biggest asset when applying for a mortgage. This is especially true once you’ve already paid for your previous mortgage. It signals that you have the capacity to pay. On the other hand, qualifying for a loan after retiring will require you to prove that you are financially stable. This can be difficult to prove if you’re relying on investments and pensions, as well as Social Security. 

 

Not to mention, buying properties once you’ve retired means that you’ll have to put in a much higher down payment to get a loan. That is not an ideal situation. 

When Is Buying Before Retiring a Bad Choice?

While buying before retiring is a good choice, it’s not always the ideal one. For example, even if you have a good credit score, that doesn’t mean that you can take the financial hit of owning two properties at once. 

 

Remember, buying before retiring means that you’ll essentially be paying for two mortgages at the same time. Unless you’ve already paid off your previous mortgage, that can take a huge toll on your finances. 

 

This is why we recommend buying a new property before retiring only IF and WHEN you can afford to pay for both real estate properties for at least a year without struggling financially. 

 

If you can do that, then, by all means, start looking for a new retirement home. 

Why You Should Sell First Before Buying

If you do decide to buy a new property before retiring, we do recommend that you try to close the deal on your current property first before looking for your ideal home. This is because, since you are financially stable already, the worst thing that can happen to you is that you’ll have to move into a rental in case your current property is sold before you can find a new one. 

 

Even if it takes you a while to find a new home for your retirement, you’ll at the very least have cash on hand. This gives you a whole bunch of options, especially if you are financially prudent.

Talk to a Mortgage Broker Today

Regardless of whatever it is that you’ve decided to do, what we recommend is that you should talk to a mortgage broker. 

 

A mortgage broker or lender or your local credit union can help you go over your current financial situation, as well as guide you on what it might look like once you retire. They are the ones best qualified to tell you if you are better off applying for a mortgage right now while you still haven’t retired, or once you have already retired. 

 

This information is important and should come into play when deciding between selling your home right now or waiting for retirement. 

 

Speaking of selling your home, you should consider talking to a cash buyer as well. If you’ve already found a property to move into, working with a cash buyer can allow you to have the money to pay a sizable down payment on your new home in as little as a month. This way, you’ll have eased the transition of going from your old home to your new one on your finances, helping you save a lot of money in the long run. 

 

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