If you’re considering retiring in the next 8-10 years then you might want to start thinking about your retirement home! If you buy it early there can be significant financial benefits. This is especially true if you’re planning on getting a mortgage.
By doing so early you’ll be taking advantage of the current low-interest rates as well! 30 year fixed mortgages have dropped to approximately 3.4% currently. Not only are there appealing saving options but there’s considerable financial benefit to putting money towards your retirement home while you’re still employed. So let’s jump right into some of the most important reasons you should consider buying your retirement home so far in advance.
Getting approved for a mortgage
When your loan application is being evaluated your debt-income ratio will be a very important aspect of that evaluation. This ratio will obviously be in a better position while you’re employed. Which means, you’ll have an easier time applying for your mortgage while you still have a reliable income.
If you waited to apply for the mortgage until you retired, it’s possible that you’ll minimize the size of the loan you could potentially apply for. Also, you can start chipping away at that mortgage ahead of time and take less of your allotted retirement income out of your pockets. Essentially, you’re getting well ahead of the overall financial impact a mortgage can have.
Odds are when you finally pick your retirement home you’ll be looking to make some improvements. If you’re purchasing a newly built home or building your home from the ground up however, you can ignore this section.
It’s always recommended that you set yourself a budget for the renovations you might have in mind. Referring back to the first point made about securing your mortgage early. It’s also very beneficial to have a steady income from working full time during the renovation process as well. It’s always possible to uncover a random setback and this steady income can help you deal with it accordingly.
Chipping away at that mortgage
Like I said earlier, beginning to pay off your mortgage early will put you well ahead of the game. The ideal goal is to be debt free during retirement. For that very reason, some may choose to rent when they retire. However, if you’re choosing to become a homeowner, the sooner you can start paying off that mortgage, the better!
Not only are you getting ahead of the game initially but you could make additional payments as well. Getting ahead 8-10 years on that mortgage is one thing however what about making additional payments during that time? You could cut your mortgage to a 15-year mortgage by the time you’re ready to move in with just a bit more effort.
Long term retirement plans
Budgeting your living expenses for retirement can be rather unpredictable. However, if you already have your retirement home set aside you can get a very good idea of what it will cost on a monthly basis to live there. So owning your home in advance gives you years of planning in terms of financial allocation.
Finances willing, you have the opportunity to rent out the house those 8-10 years before you actually move in. This allows tenants to cover the cost of the mortgage while you’re waiting to retire. Or you could allow yourself to retire early by utilizing the additional income from your tenants.
Additionally, you should look into the potential tax benefits of making it a rental property. There are a number of benefits to renting out your additional property before you actually decide to move in.
If you have any more questions regarding your future retirement home don’t hesitate to ask! Plan now for your retirement home and live in comfort since living in comfort financially should be the very goal that you strive for in your golden years.