If you're nearing retirement, or have already retired, you may be assessing how well your current home fits into your plans for the future. Often, the home that's perfect for a larger family doesn't serve the same needs for retirees.
Whether you're hoping to downsize or take advantage of the equity in your home, selling can provide you with options. If you're still on the fence about whether you want to sell your home, consider some important factors about your financial situation and personal plans for the future.
Should I sell my home when I retire?
There’s no one answer to this question. Retirement is a life stage that creates a variety of potential changes to your lifestyle. Selling your home may provide ways to embrace a new lifestyle you've been dreaming of for years. However, renting may not be the best decision for everyone. There are many benefits and downsides to consider before making the decision to sell your home.
Benefits of selling your home when you retire
Maybe you dream of travel or simply want to shed the responsibilities of homeownership or buy a less expensive home in a more desirable location. Perhaps the value of your home can open new doors for this stage of your life. No matter why you're considering selling your home, there are some notable benefits you could enjoy.
- Generate additional funds. If you own your home outright or have considerable equity, selling can help fill out your retirement savings. And a strong seller’s market can increase these savings.
- Eliminate maintenance costs. Some homes may require considerable maintenance, and you're on the hook for the costs if you own your home. Owners of larger homes often face expensive yearly property tax costs as well. Downsizing to a smaller home or renting after retirement may reduce or eliminate these costs.
- Take advantage of potential tax breaks. Consult your tax advisor to see if there will be advantages for selling your home.
- Find your ideal retirement home. The perfect home for a growing family rarely has the same requirements as the perfect home for retirees. When you no longer need the space for a growing family, you can prioritize size, layout, features and proximity to amenities you enjoy.
Benefits of staying in your current home when you retire
Your house is more than a home. It's filled with memories and it’s where you’re likely most comfortable. If you're not sure you want to leave your current home after retirement, consider the things you'll miss if you move. There are a variety of benefits of spending your retirement in a home you already own.
- Familiarity is important. Your home is the space where you should feel most comfortable. If you’ve lived in your home for several years, you're accustomed to the community and area. You likely also have relationships with neighbors, businesses and physicians in the area.
- You have family nearby. Moving to a warmer climate seems nice, but moving away from children and grandchildren may not be worth it.
- You could save money. If you own your home outright and it's in good condition, you may save money by staying put. Rent costs can be unpredictable and can fluctuate with the ever-changing housing market.
- Your home is gaining value. If your home is appreciating in value, it may be wise to delay putting it on the market.
- You want to pass your property down to a family member in the future. A family home is more than just a house. If you own a home that you want your children or grandchildren to have in the future, selling your home simply might not be worth it.
Downsizing options for retirees
Downsizing after retirement makes sense to many retirees. Living in a smaller home often means living in a less expensive home with fewer responsibilities. There are several options you can choose from to downsize your home after retirement.
1. Selling your home to rent after retirement
Many retired homeowners forget to factor in the costs of homeownership like HOA fees, maintenance and unexpected repairs when saving for retirement. It's also common for homeowners to continue making mortgage payments after retirement. If you're making monthly mortgage payments on a larger home, renting a smaller home could be more affordable. Conversely, even if rent payments are higher than the cost of homeownership, you could get a significant boost to your savings account from the sale of your home. Renting after retirement also eliminates the responsibilities of homeownership that may become difficult as you age.
2. Sell to downsize to a new home
Selling your home can provide the funds to purchase a smaller home and leave you with additional money for other expenses. However, it's important to realize that simply choosing a smaller home may not mean you're actually saving money. To maximize the savings potential of downsizing, you should choose a home that's significantly cheaper to pay for than your current home. Selling possessions you no longer use during the downsizing process can also make a big difference in how much you can add to your retirement fund.
3. Renting your current home after retirement
If selling your home isn't the right option for you, there are other options. If you choose to turn your current home into a rental, you could add the income it generates to your retirement funds or use it to pay rent or mortgage payments for your new home. Additionally, if your home is gaining value, waiting a few years to sell could be beneficial You can still sell your property later when you feel it is the right time.
How to sell your home and downsize as a retiree
If you hadn't really considered the option of selling your home when you retire, you may not know where to start. Selling a home is a big decision and it could take time. Understanding the steps involved can help you prepare to sell your home.
- Get a firm idea of your retirement goals. Retirement is about more than leaving the daily grind. You should have a clear picture of your financial and lifestyle retirement plans. Before selling your home, you should know how much money you hope to save each month by selling and if you can afford the retirement lifestyle you want.
- Research costs of selling and buying a new home. It's easy to forget about the costs associated with a home sale, and the fees included with buying a new home. Research selling fees like closing costs, real estate fees and moving. Similar fees are needed to cover your new home purchase like down payment, closing costs and realtor fees.
- Downsize your belongings. Fewer belongings mean you'll have more room in your new home. You'll also have an easier, less expensive move. Besides, selling possessions you no longer use or that don't fit into your new home or lifestyle can help add to your retirement savings. Consider whether you'll be getting rid of furniture, appliances and even vehicles.
- Talk to a Realtor about timing your sale to maximize your profit. The strength of the housing market and local home values can have a big impact on how much you make from the sale of your home. Sometimes, waiting to sell can be beneficial.
- Visit your retirement destination. Plans can change, and finding out too late that your dream destination isn't your cup of tea will put a significant dent in your retirement savings. Schedule a vacation to the area you plan to retire in. If you don't love it there, it's time to go back to the drawing board before deciding to sell your home.
- Determine cost of living changes. The cost of daily life varies significantly in different places. Calculate the costs of necessities like transportation, groceries, utilities, healthcare and local taxes. If you plan to travel, factor in those costs as well. Your proximity to an airport could make a big difference.
- Discuss your future mortgage plans with a Home Lending Advisor. If you plan to buy a new home, talk to a lending advisor about your mortgage options and how to choose an option that will maximize the amount of money you have to live on each month.
Retirement is an exciting time. Selling your home to take advantage of the equity or to downsize to a more affordable home can open up additional options for your future. If you're considering selling your home after retirement, speak to a Home Lending Advisor to learn more about your options.