Yahoo Finance 5 Reasons Retirees Regret Selling Their Homes in Retirement
You might decide to sell your home after you retire for one of many reasons. Maybe you need the cash or have outgrown the large family house. You might also want a less expensive mortgage, or the upkeep is too much to handle now that you’re older.
Whatever the reason, you want to make sure it is the right decision before selling because some people regret their decision in the end.
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Keep reading to discover some reasons retirees may regret selling their homes.
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Unexpected Costs of Buying Again
There’s no way around it — buying a home is expensive. That might surprise you if you’re not up to date with current market trends. Home prices have increased significantly over the past few years, so buying a home today will be very different from when retirees bought their current home. All of these costs of buying now could leave retirees regretting selling their home in the first place if they are looking to buy again.
Other unexpected costs are also easily forgotten. Closing costs, insurance, homeowners association or condo fees, and property taxes can all be significant. Plus, don’t forget moving costs, purchasing new furniture, and repairs or renovations for your new home.
Unless you’re paying for your home with cash, you’ll need to consider mortgage rates. If you were lucky and locked in a low rate on your existing home, high mortgage rates will cost you more if you choose to move.
The price shock isn’t just relevant when buying a new home. It can also happen if you decide to rent. Rental prices can also fluctuate significantly and tend to be less predictable.
“Homeowners often underestimate future housing costs like rent,” said David L. Blain, CFA, founder and CEO of BlueSky Wealth Advisors. “What seems affordable now may not be in 5-10 years due to inflation. Selling prematurely can mean struggling to pay rent later in retirement. Instead, paying off the mortgage and staying in the home is often the better long-term move.”
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Unexpected Costs of Selling a Home
Like buying a home, selling a home involves closing costs. These include real estate agent commissions, which can be up to 6% of the sale price.
You also need to consider the tax implications of selling your home. If you make a large profit on the sale of your home, you may have to pay income tax on that profit. Current IRS rules allow most couples to exclude up to $500,000 and individuals to exclude up to $250,000 in profits from their taxable income. This rule will also consider how long you have owned and lived in the home.
“Taxes and moving costs are often overlooked,” Blain said. “Capital gains taxes and real estate commissions can take a big bite out of home sale proceeds. The total cost to move and set up a new home also tends to be higher than anticipated. It may make more financial sense to remain in the current home.”
You Don’t Have Enough Equity in Your Home
Before selling your home, it’s important to understand the equity you have in your current home. If you don’t have much equity built up, you won’t have much to put down on a new home. This could potentially leave you with a larger house payment, which you don’t want in retirement.
A good rule of thumb is that you should have at least 10% equity in your current home if you’re selling to relocate and 15% if you are looking to buy a more expensive home.
Emotional Attachment
Many people have a strong emotional attachment to their home, especially if they’ve been in that home for many years. Your home probably saw you through many life events, like getting married, bringing home babies, raising children and having pets. Your home was likely there during the good and bad of many years of your life. It’s normal to have some emotional attachment to it.
Plus, retiring itself can be an emotional event for many people. Having two big changes at once can be difficult for many people to handle. If you may struggle with these transitions, consider separating them by selling your home before you retire or a few years after you retire.
“Homes often carry immense emotional and social value, especially for retirees who have spent decades in the same place,” said Dennis Shirshikov, adjunct professor of economics at City University of New York and head of growth at Summer. “Selling a home can lead to a sense of loss and disconnection from familiar surroundings and communities. For instance, many retirees find themselves missing the neighbors and the community activities they once enjoyed.
“A better alternative might be downsizing to a smaller, more manageable property within the same community, preserving social ties while reducing the burden of home maintenance,” he said.
Loss of Community
If you’ve lived in the same area, and especially if you have lived in the same home for many years, then you’ve probably built up a community around you. You might know and be friends with your neighbors, local business owners, and people at your place of worship or any other places you frequently visit. Plus, you might have family or friends who live near you.
If you sell your home and move far away during retirement, you might feel that initial loss of community. You can always build a new community in your new home, but know that it might take some time.
Overall, selling your home is a big change and can be expensive. Many people feel ready to sell their homes when they retire. But before you do so, make sure it’s the right decision. Thinking through this decision fully can help prevent you from regretting it later.
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This article originally appeared on GOBankingRates.com: 5 Reasons Retirees Regret Selling Their Homes in Retirement
