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  • Posted November 26, 2018

Home Ownership Potential Landmines

It’s amazing to me how much mortgage companies are willing to underwrite, it’s easy to see how so many people get in trouble. Just stretch the payments out over 30 years, and you can “afford” even more home. Here’s the thing, if you are buying a house after the age of 40, and you get a 30 year mortgage, how are you going to make those payments? Especially if you buy at the limit the mortgage company allows?

The median Social Security monthly income in 2018 was $1,400 (Business Insider, 23 April 2018), and according to LendingTree the average mortgage payment was $1,029/mth (National Average Monthly Mortgage Payment). Even if you’re living with someone and sharing the cost, this should be concerning. Especially when you consider housing costs will vary widely around the country, with much lower differences in Social Security.

When you retire your living expenses are not going to immediately decrease, you’re not going to stop doing things when you stop working. Yes, there will be things you currently have coming out of your check that won’t in retirement; but if we’re being honest how many of us even look at what we’re being paid before it hits our bank account? Most of the people I work with are using what they see on payday to live their lives – and this doesn’t change in retirement. So be careful using the argument you need to earn less – focus on how much money you are bringing into the house.

Can you grow old and live in the house, or will you need to sell it because you can’t navigate the stairs? Like it or not, as we age many of us will experience mobility challenges and risk falls – and we should factor this in when buying our “forever home”. Who will maintain the yard and/or shovel the sidewalk and driveway? When you stop working will you have enough money to pay for these services? Is it worth it to you?

If we die with a mortgage, and we want our children to continue living in the house, we need to ensure we have enough assets (investments) or life insurance to pay it off; otherwise the bank will take it back. Larger houses will often come with higher property tax and insurance bills, and these don’t go away when the mortgage is paid off. How your child pays for these when you’re gone should be considered. Yes, they may receive Social Security; but will it be enough to sustain them?

As you get closer to retirement please think about how much house you “need”. For families, like mine, who opt to buy in areas with more services your purchasing dollars will not go as far; because with services comes higher taxes (something has to pay for them). Housing is personal, and we may have blind spots around it. Invest in yourself and hire a financial planner to help outline what your true cost of retirement is likely to be. Don’t allow yourself to be anchored to spending “x” amount of dollars.