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 plan to work past retirement age, which means they’ll have years of income to put toward a home.
- Those considering making a new home purchase should consider moving to a cheaper location, whether they need space for visitors, and the loan duration, which should not exceed 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.
3. Is Paying Off the Mortgage More Important Than Maximizing Retirement Savings?
Maximizing retirement contributions may ultimately net you more money than the cash you’d save by paying off your mortgage. Since no one knows for sure what the investment markets will do in the future, it’s wise to be conservative and never stop making retirement contributions. And remember: Social Security should be an additional revenue stream, not the main income source.
4. Where Will You Live?
Location significantly influences home prices. For example, the same home in Austin, Texas, is likely to be much pricier in San Francisco, California. If you’re not prone to chasing cheaper homes by moving to a different state, consider price differentials across different neighborhoods in your area. But remember: although homes in more remote areas may be cheaper, they might not be the smartest choice for those who dislike driving long distances to town centers.
5. How Is Your Health?
If you or a family member is in declining health, you may need to allocate your savings to medical expenses in lieu of a new home. This is a good reason to not overspend on housing.
6. How Often Do Your Kids Visit?
If your extended family visits often, buying a larger home with plenty of bedrooms makes sense. But if your family only visits every few years, paying for hotel rooms is much more economical than paying off the mortgage on a large home.
7. Is Now Really the Right Time?
If you had kids later in life, who you'll soon be sending to college, avoid buying a new home for now—unless you plan to downsize, in which case some of the money from selling the old house may be used to cover tuition expenses.
The Bottom Line
If you’re in your 50s, it’s not too late to buy a new home, but it's key to ask the right questions and make the wisest decisions possible. Above all, make sure you won’t be stuck making mortgage payments years after retirement.