If you’re in the market for a new home after age 60, you need to think differently than when you were in your 30s. The margin for error is much smaller now, and it will be harder to recover from a poor financial move. Proper risk management is key.
If this sounds a bit unnerving, it should. Anytime you’re considering investing hundreds of thousands of dollars in a single asset later in life—and an asset that needs considerable care and maintenance—you need to know exactly what you’re doing and why.
Perhaps you know exactly why you hope to buy, but it’s worth taking a closer look at, nonetheless. For example, are you looking for a vacation home, an income property, or simply a place to live? (This article will assume the latter.) Are you looking to downsize or otherwise change your lifestyle? Do you value the pride of homeownership more than the flexibility of renting? Do you assume buying is a better financial move than renting?
Some people realize they aren’t exactly sure about their motivation for (and expectations of) buying, or have fallen prey to received wisdom or urging by friends and family.
The fact is, buying a home—or a particular type of home—might not be the solution you think it. You might even discover that you value the perks of renting more than owning—such as low maintenance costs, smaller commitment, fun amenities, fewer surprise expenses, and fewer headaches in general.
The standard advice for anyone buying a home is that, if you plan to live there for fewer than five years, the transaction costs may wipe out any home appreciation, leaving you without the benefits of having invested in the property.
So if the home you’re looking at is, say, a condo by a golf course, but your doctor says that your 75-year-old knees and hips are going to need replacement soon, you might figure on moving into an independent living facility when golfing is no longer an option. In that case, looking for rentals might pencil out better.
Importantly, when deciding whether to rent or buy, you need to carefully assess the local real estate market in the areas you’re looking. A good regional rent versus buy calculator and home affordability map can help with this.
In some markets, like New York City and San Jose, it could take more than 15 years for buying to beat renting (at least on paper). That’s a long time to spend in the hole compared to renting—and that’s assuming the home appreciates on schedule, which is never certain.
If you have always owned standard single-family homes, now might be the first time you’ve looked into buying a condominium, townhouse, or similar property.
These can offer significant advantages to seniors, such as reduced maintenance of the roof, land, and other common areas (which the homeowners’ association takes care of).
But they also come with a new set of expenses that need to be factored into your budget, namely monthly fees that can be as high as what some people pay in rent, and “special assessments” when emergencies come along. See Nolo’s articles on Buying a New Home or One in a Development for more information.
At the far end of the spectrum you might consider “buying” a place in a senior living facility. In some cases, this does not actually involve purchasing legal ownership. Instead, you pay a large entry fee for the right to live there (perhaps for life), a percentage of which might be returned to you or your family when you leave or pass on. Such arrangements are outside the scope of this article, but depending on your age, are certainly worth examining or keeping in mind as a financial goal.
As for how to finance your home purchase, be sure to read Over 60 and Buying a House: Should I Borrow or Pay All Cash?.