How to Retire Regret Free

There are approximately 77 million Baby Boomers, all born before 1959, contemplating retirement.

Whether you’re 59, 65 or 70, you’re thinking about what you’re going to do with the next part of your life. Of course, you want to make sure you’re making the right move, one that leads to happiness, health and adventure. It’s time, then, to figure out how to retire without any regrets.

How can you accomplish this? It’s easy — even if you’ve already retired, you can still take steps to make sure there are no regrets ahead of you — through homeownership.

Homeownership

The easiest way to retire without regrets has to do with your home. Your home is your biggest asset, whether you’re retired or not. It is your home base and should continue to be as you enter retirement and beyond. Why? Because retirees who own their homes have an advantage over those who rent as they go into retirement.

In an article from the Urban Institute, Christopher Herbert of the Joint Center for Hosing at Harvard University, says, “The major benefit of homeownership to seniors is the ability to live rent-free, once the mortgage is paid off.”

He cites studies that show only “12 percent of homeowners without mortgages spend more than 30 percent of their income on housing costs, compared with (more than) 50 percent of renters and 45 percent of homeowners with mortgages.” The median wealth of senior homeowners in 2010 was $267,100, compared to senior renters, whose median income was $6,100.

As we age, health concerns come to the fore and living independently may not be possible. In these cases, Herbert says, senior homeowners have more funds in the form of home equity to draw from, making the transition into senior housing easier.

Financing a Home

What if you don’t own a home? What if you’re thinking of downsizing to a smaller place, like a condo? Are there ways for seniors to purchase a home just before or after retirement? There are, but you need to be cautious, think about whether your lifestyle will allow you to own a home and plan.

Before you think about buying a home or refinancing, think about why you’re doing it. Are you downsizing, buying a smaller property or condo? Are you thinking about buying a second home? Or are you moving permanently to a new, warmer area? The answer to those questions will dictate the type of financing you choose. There are several options:

• Standard Mortgage – If you’ve already owned a home, you’re familiar with the standard, 30-year mortgage. Your credit rating, the amount of money you have for a down payment and how much you can afford to pay each month will dictate whether you qualify. Remember, though, you probably will carry that mortgage payment the rest of your life, so you need to plan.
• Second Mortgage – If you’re buying a second home, or just looking to make your home senior-ready with hand rails and, perhaps, ramps to the doorways, a second mortgage may be the key. They’re usually for a smaller amount than the equity you have in your original home, but carry a higher interest rate and a much shorter term.
• Reverse Mortgage – There’s a lot of talk about reverse mortgages. This type of financing is only available to homeowners ages 62 and older. Each month, the lender sends you a check to pay off their obligation to you and at the end of the loan period, the bank owns the house. This is another way of earning money from your home and it doesn’t cost you anything. There are certain rules and stipulations you’ll need to examine carefully before you act on a reverse mortgage, so proceed with caution.
• Home Equity Conversion Mortgage (HECM) – Similar to a reverse mortgage, a home equity conversion mortgage is a type of loan that’s regulated by the federal government and gives homeowners better rates. Plus, the costs and fees are worked into the loan, so you don’t have to worry about coming up with money when you close
• Home Equity Line of Credit (HELOC) – Like a credit card, a HELOC is attached to the equity in your home. You use as much or as little of it as you need and you only must pay interest on the loan at the beginning. This type of financing is best when looking at repairs and renovations.

Protecting Yourself

It’s important to beware of scams that take advantage of seniors; some have lost their homes because they didn’t read the fine print or were taken advantage of by unscrupulous, non-secure lenders. How do you make sure you don’t regret your decision to purchase a home or refinance your existing home? By protecting yourself. Some things to consider:

• If it sounds too good to be true, it probably is
• Read and understand the fine print before you sign anything
• If you’re not sure you understand the fine print, take someone else along with you who does
• If you’re feeling rushed, they’re probably trying to pull the wool over your eyes. Never agree to or sign anything until you’ve had time to fully consider your options
• Get a second opinion
• Make sure to talk to neighbors before you buy
• If you’re looking to move out of your community, perhaps to go somewhere warmer, spend some extended time there to make sure it’s a good fit. Many have moved after a short visit, only to find it was too boring, too limited or too far outside their comfort zone after moving

There’s no question: the best way to retire regret free is to own your own home. Whether it’s the home you’ve lived in for decades or you’re building a retirement home in a warmer climate or closer to your grandkids, there are clear advantages to homeownership, both for the short and long terms.