As you sail into your golden years, purchasing a new home might come onto your radar — but it might also give you pause.
Whether you’re a first-time buyer finally ready to5 put down roots or a current homeowner looking for a change, your age shouldn’t stop you from purchasing a home, according to finance expert Suze Orman. However, it’s essential to consider your financial situation before moving forward with this big commitment.
Read on to learn about what factors to consider when deciding on a homeownership move in the lead-up to or during your retirement.
Steal this billionaire wealth-building technique
The ultra-rich have also been investing in art from big names like Picasso and Bansky for centuries. And it's for a good reason: Contemporary art prices have outpaced the S&P 500 by 136% over the last 27 years.
A new company called Masterworks is now allowing everyday investors to get in on this type of previously-exclusive investment. You can buy a small slice of $1-$30 million paintings from iconic artists, all without needing any art expertise.
If you have at least $10k to invest and are ready to explore diversifying beyond stocks and bonds,see what Masterworks has on offer. (Hurry, they often sell out!)
Assess your financial readiness
Although your age isn’t a barrier to buying a house, your financial situation might be.
Start by considering your retirement nest egg. If you are concerned that your resources might be lighter, there might be better ideas than adding the financial commitment of a house to the mix.
However, homeownership might be a natural next step for retirees with a comfortable nest egg for their golden years.
Want to learn how to build wealth like the 1%? Sign up for Worthy to get ideas and advice delivered to your inbox.
The 20% down payment rule
Although buying a house with less than 20% down is possible, Orman strongly recommends putting down at least 20% on your home purchase. Additionally, Orman suggests saving up an emergency fund between eight to 12 months of your projected expenses before committing to the purchase.
When combined, these two suggestions involve saving up a lot of cash. If you have the funds, a home purchase may be in the cards. Buying a house might deplete your resources and represent a risk to your long-term financial situation if you don't have such deep cash reserves.
Opt for a 15-year fixed mortgage
If you are buying a house at an older age, Orman suggests opting for a 15-year fixed-rate mortgage.
“Truthfully, you should be doing a 15-year fixed rate mortgage because you don't still want to have a mortgage at the age of 95,” says Orman.
Of course, a 15-year mortgage comes with a higher monthly payment — but buying a house might not be the right move if you can't swing the larger payment.
Get a free stock valued between $5 to $200
Secret: You don't need thousands of dollars to buy thousand-dollar stocks or create a diverse portfolio.
Robinhood offers a method of investing called “fractional shares.” On its own, one share of a single stock could cost a lot of money, making it difficult to diversify. Robinhood allows you to buy pieces of stock instead, so you have the option to build a diverse portfolio quickly.
Let’s say you want to invest $250, as an example.
With that amount, you could build a relatively diverse portfolio with an investment of $50 in a big tech stock, $50 in a retail stock, $50 in an energy stock, $50 in a manufacturing stock, and $50 in a bank.1 <p>This content is for informational purposes only, you should not construe any such information as legal, tax, investment, financial, or other advice. </p> <p>To get stock reward, new customers need to sign up, get approved, and link their bank account. Stock rewards shares cannot be sold until 3 trading days after the reward is granted and the cash value of the stock rewards may not be withdrawn for 30 days after the reward is claimed. Stock rewards not claimed within 60 days may expire. See full terms and conditions at <a href="https://robinhood.com/us/en/support/articles/open-account-pick-your-stock/">rbnhd.co/freestock</a>.</p> <p>Fractional shares are illiquid outside of Robinhood and are not transferable. Not all securities available through Robinhood are eligible for fractional share orders. For a complete explanation of conditions, restrictions and limitations associated with fractional shares, see the Fractional Shares section of our Customer Agreement.</p> Robinhood Gold is offered through Robinhood Financial LLC and is a membership offering premium services available for a fee.</p>
Even better news? Add a Robinhood Gold membership, and you’ll get access to 4.25% (as of 11/15/24) APY2 <p>Annual Percentage Yield. Rate valid as of April 12, 2024. To earn interest, a cash balance is needed. If you have a margin balance, there is no cash balance to earn interest. Interest rates for cash sweep and margin investing can change at any time. Fees may reduce interest earnings.</p> on your uninvested cash3 <p>Interest is earned on uninvested cash swept from your brokerage account to partner banks. Partner banks pay interest on your swept cash, minus any fees paid to Robinhood. As of Nov 15, 2023, the Annual Percentage Yield (APY) that you will receive is 1.5%, or 5% for Gold customers. The APY might change at any time at the partner banks' or Robinhood's discretion. Additionally, any fees Robinhood receives may vary and are subject to change. Neither Robinhood Financial LLC nor any of its affiliates are banks.</p> <p>All investments involve risk and loss of principal is possible.</p> <p>Robinhood Financial LLC (member SIPC), is a registered broker dealer.</p> and the ability to buy and sell stocks 24 hours a day, 5 days a week.
Open and fund a Robinhood account and earn up to $200 in stock
Account for all costs
It’s tempting to believe that the costs associated with your home purchase end with your mortgage. Unfortunately, most homeowners quickly discover that’s not the case.
Beyond your mortgage payment, you’ll have to handle maintenance costs and emergency repairs.
Here’s a look at some of the other expenses to consider:
- Pest control
- Electric bill
- Water bill
- Yard maintenance
- HOA fees
- Home updates
- Ongoing maintenance
- Emergency repairs
For example, homeowners must pay to replace their A/C unit from time to time. Depending on where you live, that could cost up to $12,000, according to Angi.
Keep all of these costs in mind. The best way to prepare is to have a deep emergency fund.
Test your budget
If you are seriously considering buying a house, Orman recommends “playing house” before you purchase an actual home.
Playing house is a financial simulation where you’ll commit to ‘making a house payment’ for six months by transferring the dedicated funds into your savings account.
Beyond the expected mortgage payment, add in potential insurance premiums, property taxes, and maintenance costs to estimate a future housing payment. Orman recommends expecting monthly maintenance costs of at least $200 to $300. From there, subtract your current rent payment.
For example, if you expect to spend $2,500 on monthly house bills and currently pay $1,000 in rent, playing house involves setting aside $1,500 monthly. If you can comfortably support this exercise, you might be ready to buy. But if you feel strapped by the missing cash, it’s a sign that buying a house may stretch your finances too far.
It’s better to find out that you aren’t comfortable with a larger housing payment before you commit to a home purchase. In the worst-case scenario, you’ll realize you aren’t ready for homeownership, but you’ve at least managed to build up some extra savings during the exercise.
Trending Stories
Make sure you’re stable
When making a home purchase at any age, it’s important to assess the stability of your income and comfort level with long-term payments.
Of course, later in life, your income situation may look different than that of other house shoppers, but it’s still critical to ensure you trust your income to continue for the duration of the home loan.
For some, that could mean continuing to work to bring in funds to cover the mortgage. For others, that could mean enjoying the proceeds from the investment portfolio you’ve built over a lifetime. In either situation, confirm that you can pay the mortgage for the next decade and a half.
Assess the home’s functionality for the future
Aging is a natural part of life. As you age, the right home can make your life easier.
Specifically, a low-maintenance home with minimal stairs can set you up for an enjoyable home life, and things like bathroom modifications can add expenses down the line. As you house shop, keep the needs of your future self in mind.
Weigh the cost against other goals
Homeownership is often expensive. Since everyone has different resources, consider how buying a home would impact your other financial goals.
For example, you want to travel during retirement. If your home purchase derails that dream, renting is a better fit for the moment. Weigh out your options and choose what makes the most sense for your situation and retirement plans.
Bottom line
Age doesn’t determine whether or not you can purchase a home. Instead, your financial situation matters the most.
If you’ve already committed to a home purchase and need help managing your finances, explore these ways to help pay your mortgage.
Ark7 - Real Estate Investing Benefits
- Invest in cash-flow-generating, professionally managed rental properties without having to buy the whole property
- Sell shares at will at no cost
- 3% sourcing fee and 8-15% monthly management fee
- $20 minimum investment
- Ark7 investors have earned 5%+ annualized distributions from monthly income alone4 <p>The 5%+ return is the portfolio average and is based on figures since Q4 2022.</p>
Subscribe Today
Want extra-cash moves to come right to you?
Stop browsing endlessly. Get proven ways to earn pocket money, help cover rent, and crush your debt — sent to your inbox daily.