As we age, it makes sense that our housing needs change and independent living is important at any age. As young adults, we might have rented a home and perhaps had roommates to split the costs. Marriage and children required our own, larger place. And prudent financial planning told us to buy a home once we had attained the financial ability to do so. But now the kids have grown and moved out, we have retired or plan to do so in the near future, our income is likely to flatten, and the 2 story, 4 bedroom, 3 bath homestead on ¾ of an acre just doesn’t seem to fit our needs anymore. Whether you are a young adult or an empty nester senior, it’s important to “rightsize” your home as best you can.
So what sort of options do we have?
Sell the home and move to a home better suited for your needs.
Downsizing – either buying or renting a smaller home – is a common practice for seniors. A smaller home tends to mean less house work and less yard work – attractive features for seniors. A smaller home also tends to mean lower costs in utilities, real estate taxes, property insurance, etc. And perhaps that smaller home also means one story (and no steps) living – another attractive feature.
Often moving to a new home means selling your existing home and that can be a daunting task. Some homeowners may have bought their home 20… 30… 40… years ago and have never sold a home until now. Regardless of your level of home selling experience, it would be wise to seek help from professionals – realtors with the Seniors Real Estate Specialist designation and experts in financial planning, tax accounting and senior law.
Tips before you put your home on the market: 1) Do some major de-cluttering early – you’ll need to get rid of or move stuff anyway when you sell – may as well spread that work out over time. Plus a de-cluttered home will be more appealing to potential buyers. 2) If you have reason to think your home is over assessed and therefore over taxed, look into the real estate assessment appeal process in your municipality. It goes without saying that potential buyers will likely factor it the tax costs of your home if/when they decide to submit an offer on your home.
Stay in your home but make some changes that work for you.
Do you have family who could move in? It’s possible that with minimal and perhaps no construction changes, you can make your home work well for everyone, including the sharing of costs. There is also the option of buying a home with an in-law suite.
How about a roommate? Maybe landlording was never something you had an interest in, but if collecting income by renting out a bedroom or two means you can afford to stay in your home, it might be worth the effort.
Restructuring debt might be the answer. And for homeowners age 62 and older who have a significant amount of equity built up in their house, reverse mortgages are a viable option. Homeowners can borrow against that equity – taking the cash in a lump sum, as a monthly income stream or as a line of credit they can tap when needed. The money doesn’t have to be repaid until the owner moves, sells the house, or dies. In the latter event, the owner’s estate would be expected to sell the house to repay the loan.
These reverse mortgage loans must be first position liens, meaning if the homeowner has a mortgage already, that mortgage must be paid off before the reverse mortgage can be issued. To reiterate, no monthly mortgage payments are required with reverse mortgages, however, homeowners must pay their regular property insurance and real estate tax bills.
Reverse mortgages can be useful tools for some senior homeowners but won’t make sense for everyone. Put another way, everybody has their own unique set of circumstances. Like any financial decision, it’s important to research the pros and cons thoroughly before making any commitments.
Independent living is important to most seniors, whether they plan to move out of their current home or stay put. Don’t hesitate to reach out to a realtor with the Seniors Real Estate Specialist (SRES) designation, financial advisor, or a trusted family member or friend who may be able to provide some helpful advice. And there are government agencies designed to serve seniors. These agencies can assist with housing, medical, transportation, etc. questions and in some cases, may also be able to provide financial assistance. Once you’ve done your research, factor in your specific set of circumstances and make the housing decision that’s best for you and your family.
The author, Rick Sheppard, is a licensed real estate broker with RE/MAX Achievers, Inc in Pennsylvania and a 32+ year veteran of the real estate trenches. He knows a lot because he’s seen a lot. If you have any questions about this or any real estate related topic, feel free to contact Rick at [email protected] and he’ll do his best to answer your questions.