Getting a Mortgage in Your 50s
What Are the Implications of Buying a Home in Your 50s?
Many people in their 50s wonder if it’s too late in life for them to purchase a home. Years ago, the answer would likely be yes. However, 74% of Americans plan to work past retirement age, which means they’ll have years of income to put toward a mortgage. There are some considerations for those interested in taking the new-home plunge.
- 74% of Americans want to continue working once they reach retirement age, giving them years of money to invest toward a house.
- Those who are thinking about buying a new house should think about relocating to a less expensive area, if they need room for guests, and the loan term, which shouldn’t be more than 15 years.
How to Get A No-Down-Payment Mortgage
1. How Big a Home Do You Really Need?
It’s not always wise to buy the biggest home you can afford, particularly if your children have left or if plan to leave soon. Not only are bigger homes expensive to heat and cool, but it can be labor-intensive to decorate and clean many rooms. On the flipside, a bigger home will allow you to accommodate grandkids for overnight visits.
2. Would Another Mortgage Type Work Better?
For those purchasing a home in their 20s and 30s, a 30-year mortgage is the obvious financing choice—in part, because people of that age typically don’t have the financial means to make the higher payments associated with shorter-term loans. But people in their 50s might wish to opt for a 15-year mortgage, to make sure they can pay off the loan while they’re still working.
Using a mortgage calculator is a good resource to budget these costs.
3. Is Paying Off the Mortgage More Important Than Maximizing Retirement Savings?
In the long run, increasing your retirement contributions could be more profitable for you than paying off your mortgage would be. It is advisable to be cautious and never stop contributing to your retirement account since no one can predict what the investing markets will do in the future. Also keep in mind that Social Security should not be your primary source of income, but rather a supplementary one.
4. Where Will You Live?
Home values are largely influenced by location. For instance, a house in Austin, Texas, would probably cost far more in San Francisco, California. Consider the price differences between various areas in your region if you aren’t prone to relocating to a different state in search of cheaper houses. But keep in mind that, although being less expensive, houses in more rural places may not be the best option for those who loathe traveling far to get to town centers.
5. How Is Your Health?
You could need to use your money for medical costs rather than a new house if your health is deteriorating or that of a family member. This is a compelling argument against overspending on housing.
6. How Often Do Your Kids Visit?
It makes sense to purchase a bigger house with plenty of bedrooms if your extended family comes often. However, paying for hotel rooms is significantly more cost-effective than paying down the mortgage on a huge house if your family only travels once or twice every few years.
7. Is Now Really the Right Time?
Avoid purchasing a new home if you have children later in life who you will soon be sending to college unless you intend to downsize in which case part of the proceeds from the sale of the previous property may be utilized to pay for tuition.
The Bottom Line
It’s not too late to purchase a new house if you’re in your fifties, but it’s important to ask the appropriate questions and choose carefully. Above all, be sure you won’t be forced to continue paying your mortgage when you retire.
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