Seniors choose to purchase new homes in retirement for several reasons. Some choose to move because they don’t need all the space their current home has. Some move because it is too expensive to pay energy and utility bills for a large house. Some move to smaller homes that will make it easier for them to manage and maintain as they get older. No matter the reason for your move to a new home, there are three financial considerations you should make when you do so.
- Compare the Costs of Remaining in Your Current Home to Purchasing a New Home
The best way to determine whether purchasing a new home later in life is a good financial move is to compare the costs of remaining where you are to purchasing a new house. For many seniors who choose to downsize, they improve their income and cut expenses, according to Boston College’s Center for Retirement Research program director Steven A. Sass. According to the research, downsizing from a $250,000 house to a $150,000 house increases yearly income by $3,000 and reduces annual expenses by $3,250, which saves seniors $6,250 a year.
Aging in place is among the top trends of the past year for senior housing. For seniors who choose to age in place in a new, smaller home, those yearly savings can help them make the home modifications they will need to spend the rest of their lives in the comfort of their own homes. For example, they can hire a contractor to modify a bathroom to feature a walk-in tub or shower, to modify a kitchen with lower upper cabinets and a more accessible sink, and to replace flooring such as carpeting that can pose a tripping hazard with skid-free tile.
- Understand the Hidden Costs of Downsizing
Of course, there are some costs of downsizing that seniors should consider. When you begin the process of selling your current home and purchasing a new one, you will have to consider the cost of hiring a realtor and the commission she will make when you sell your home. You also need to consider the costs of moving, the energy bills for your new home, and the cost of any modifications or accommodations you want to make.
If your current home is paid off and you have built up equity, you likely will be able to use the money from the sale to cover your closing costs on your new home, pay for your new smaller home, and cover your moving expenses. You can discuss these financial challenges with your realtor, a financial advisor, or a mortgage lender before you make the decision to purchase a new home.
- Do Your Homework When It Comes to Moving Costs
Another reason that downsizing is a financially attractive option is that the less you move, the less you pay. When you move to a smaller home, you should study the floor plans and understand exactly how much room your new house has. Then, organize and sort your belongings and determine which to donate, which to sell, and which to keep. For seniors who consider this a daunting task, it is a good idea to hire a senior move manager or rely on family members for help. The key is to start early, keep the most sentimental items but avoid cluttering your new home, and take advantage of the extra income you can make from having a moving sale.
Moving costs may be more than you bargain for, so it’s a smart idea to do your homework and understand what the average moving costs are. Of course, the further you move and the more stuff you take with you, the higher the cost of the move. The American Moving and Storage Association states the average cost of an interstate household move is about $4,300 and the average cost of an intrastate move is about $2,300. If you hire a full-service moving company, you can expect to pay more. Of course, relying on family members to help you move saves money, but you put your loved ones (and your belongings) at risk because they do not have the proper equipment or experience to move you safely.
There are several financial considerations seniors should make when purchasing a new home. Look at the costs of remaining in your current home compared to those associated with purchasing a new one, the hidden costs of downsizing, and moving costs when making your decision.
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