The Fictitious Age Limit On Home Buying

pensioners_2242043bYes, buying a home is a long-term investment. But no, you can never be too old to buy a home.  Consider it an investment that you can live in for now, and one day leave for your family members to enjoy.  It all depends on the area that you plan to live in when asking the question of whether to rent or buy a home.  If taking a mortgage into retirement is your biggest concern, than consider the fact that if you do not take your mortgage payments into retirement, you are most likely taking unstable rent charges into your retirement instead.  I use the word “unstable” when discussing rent because rent is always subject to change, and all of a sudden it can become unaffordable forcing you to get up and move out.  The only exception to making mortgage payments or paying rent is if you have a loving family member allowing you to live in their home for free throughout your retirement.  For the rest of you without the luxury of zero monthly payments on housing, use the following tips to influence your decision in whether you should rent or buy as you approach your many more years of wisdom.

Location, Location, Location: Consider where you would like to live, because for the most part buying is significantly cheaper than renting throughout the country.  Of course, one must consider the factor of closing costs, down payments, property tax, homeowner insurance, and mortgage insurance when comparing rent vs. buy.  Trulia has a very helpful tool on http://www.trulia.com/rent_vs_buy/?ecampaign=fb_rentvbuy to help make that comparison as accurate as possible.  It is important not only to view the comparison between rent vs. buy, but also to consider all of the other factors I mentioned by clicking “show advanced settings” just below the rent vs. buy calculator.  If you need assistance with any of the drop-downs a convenient “i” has been placed to the right to help explain the meaning of each category.  Still confused?  Scroll down a bit to get a definition of the category that you need help filling out.

Trulia also came up with an interactive map that determined exactly how much cheaper it is to buy a home vs. rent one all throughout the United States.  The following lists the percentage of house much cheaper buying is than renting throughout California in descending order:

Bakersfield, CA – 39% cheaper

Fresno, CA – 35% cheaper

Riverside/San Bernadino, CA – 33% cheaper

San Diego, CA – 30% cheaper

Sacramento, CA – 30% cheaper

Ventura County, CA – 27% cheaper

Los Angeles, CA – 24% cheaper

Oakland, CA – 24% cheaper

Orange County, CA – 21% cheaper

San Francisco, CA – 13% cheaper

San Jose, CA – 9% cheaper

Bear in mind that average home prices in these areas must also be considered when decision making.  The Demand Institute reported recent median home prices in California.  To view these numbers, read: http://broadviewmortgageorange.com/broadview-mortgage-reports-investor-activity-creates-illusion-progress-housing-recovery-however-california-still-projected-experience-increase-home-prices-years-co/.  Figure out what price ranges you can afford before anything else.

As long as you will be in the house for at least 5 years, buying is most likely a better course of actions after all things are considered.  During your time of homeownership, although it is not guaranteed, gaining equity on your home is a possibility.  Homeowners obtain equity on their home when the market value of the home has gone up from the price that the homeowner purchased it at.  Another reason why buying a home is a better decision than renting is a matter of equity.  Why would you rather be committed to helping your landlord obtain equity when you could build equity for yourself for a lesser than or equal cost to you?  In the Demand Institute’s report, projected home value increases were included throughout California.  Click the link in the paragraph above to view projections and understand that if these projections hold true, what a great opportunity it would be for homeowners to gain equity.

 The Down Side:  Especially after the mortgage crisis, we as Americans know that there is not always an opportunity to build equity in a home as the epidemic called foreclosure that swept the nation has taught us.  People with negative equity on their homes are considered underwater, as their mortgages are higher than the current market value of the home.  This was the result of predatory loans, or mortgage companies handing out mortgage loans for homes that they knew that the homeowner could not afford.  The bright side of this is that regulations on the mortgage industry have increased, and mortgage companies require plenty of paperwork to determine whether or not a person should obtain a mortgage loan of a certain size to prevent another mortgage crisis from occurring in the future.  Try to find an affordable spot you know people will always want to live at such as near water, or within a decent proximity (about 30 minutes) from a major city.

You Know What To Expect: Mortgage payments remain consistent over the life of the loan as long as you have a fixed-rate mortgage.

The Down Side:  Mortgage payments remain consistent in a fixed-rate loan.  What do not always remain consistent are the payments that tag along with your mortgage payment.  For example, home insurance, mortgage insurance, and property taxes are subject to change.  However, you might have the ability to change certain aspects of these additional costs.  For tips on managing these costs, read: http://broadviewmortgageorange.com/signed-monthly-mortgage-payment-went-sudden/ .

A Place You Can Call Your Own: A house is your own.  Make it somewhere that you love to be.  You can remodel it, paint, decorate, and even fix it up.  Other than decorate, you can’t really have any of that freedom in a rental.  If you fix the place up and remodel, chances are that the overall value of the home will increase, which means more equity for you.

The Down Side: If you have done your homework, you can find a fixer upper that won’t hurt your bank account too much, but if you don’t do enough homework before purchasing the home, a fixer upper could put you into severe debt.  Issues such as mold, leaks, and roof problems can be extremely costly and can become much more of a burden than you had intended for.  As a homeowner, other standard maintenance can either require a lot of work on your part, or costly work on behalf of a third party.

Obviously the idea of having debt in retirement is not sexy or glamorous to anyone.  Retirement is a time for the most minimal amount of debt possible – ideally none.  For those of you who are considering home buying before retirement, whether it is five or ten years away, try to pay as much of your mortgage down before you fall into retirement with the money that you make from work.  Potentially consider obtaining a shorter loan term such as 15 years rather than 30.  For more tips on paying down your mortgage faster, read: http://broadviewmortgageorange.com/get-fast-track-paying-mortgage/ .

If you have any questions about the information herein, feel free to reach out to the Author, Brittany Williams, at Brittany.williams@broadviewmortgage.com.  If you would like a quick preapproval Click Here, and for assistance with down payment or buyer assistance Click Here.  You are also always free to give us a call Toll Free (855) 692-7623.



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