1. Qualifying for a mortgage is easier while you’re still working
It’s likely that your income is at its highest right before you retire. Your debt-to-income ratio is more favorable as well. Keep in mind, you may be limited to a smaller mortgage amount after you retire because you’re living off of your retirement savings. While distributions from retirement accounts can go toward your monthly income totals, lenders can only use a percentage of the expected distribution amount.
Pro-Tip: It’s wise to lock in a low-interest rate now, while the market is favorable!
2. Have Extra Cash for Upgrades and Unseen Costs
You may be prepared for the “extra costs” of home inspections and insurance, but sometimes there are unexpected costs of buying a home that can not be prevented. A storm could roll through and take down a tree in the yard, or the pool pump could give out two weeks after closing. Handling these unexpected costs, or even any home upgrades that you wish to make is easier done while you still have a monthly income check.
3. Securing A Home Allows Better Financial Planning For Retirement
Once you purchase your home and start paying the monthly expenses, you’ll have a better idea of the true monthly overhead your home requires, instead of having to estimate certain costs such as lawn care, insurance, and electricity. Having this insight allows you to adjust your budget for remaining retirement expenses and overall financial planning.
4. A Retirement Home Can Be A Safety Net
Let’s say you purchase your retirement home, and a year before you retire, you find yourself with a major medical bill to pay. One option you have to cover the unforeseen bill is the take out a home equity line of credit (HELOC) on the home you intend to sell after you retire.
If you didn’t have that second home already purchased, you would be required to pay off the HELOC before selling your current home, thus tying up that home equity you spent years building up. However, if you already own the home you intend to spend your retirement years in, then you can repay that HELOC in your own time.
These are just a few reasons to consider buying your retirement home at least a year or two before you plan to retire. Of course, there are tax benefits and homestead exceptions to be considered as well. If you’d like to discuss your retirement situation specifically, I’d be happy to chat about what options make sense for you!
Don’t hesitate to reach out at 239-472-1950 or team@mccallionrealty.com!
