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Finding a New Home after Downsizing

Finding a new place:

 

Once you’ve made the decision to downsize, the next step you need to make is to decide where you want to go and what kind of home you want.

 

The location you choose will depend on several factors. Do you want to be near family? Do you want to reduce your work commute? Do you prefer a city, a suburb, or a rural environment? Do you want to move to a location that has a lower cost of living? Depending on where you choose to live, you might not actually be saving money. A large house in an area with a lower cost of living might actually be a better financial  position for you than a small house in an area with a higher cost of living. Working out a budget at this point is pretty critical.

Very often, downsizers want a smaller home but with no less luxury. For example, if your larger home has granite countertops, most downsizers choose to have granite in their next home, and sometimes even use some of the extra cash they have to upgrade the kitchen appliances as well. Larger master suites are also a common feature downsizers want, and often are willing to sacrifice larger guest suites.

The type of home you choose will also depend on several factors. Some of your options are:

  • small-wooden-house-906912_960_720Smaller house – The benefits of choosing to move to a house are many. First of all, you retain the most freedom this way – you don’t need to comply with HOA requirements or age restrictions. Choosing a house means you’ll still have to do the maintenance and upkeep, however, even though it will likely be less time consuming and costly than in a larger home. A house will probably have more space than any other option, so if a guest bedroom or two is important to you, or if you want a formal dining room, this may be your best bet.
  • condo-619977_960_720Condominium – Many downsizers choose condos not only because they are significantly less costly than a house but also because maintenance will be done for you. No more shoveling snow or raking leaves is a pretty nice incentive. In many cases, condos are only one story so you can eliminate stairs if that’s an issue. Condo living sometimes comes with sweet amenities like clubhouses, pools, tennis courts, and so on. If you choose a condo, however, don’t forget that you’ll have to pay HOA fees which vary dramatically from place to place.
  • Rent – If you want to free up some cash, or move to temporary digs while your dream home is being built or while you’re waiting for retirement, renting might be a great option for you. The best part about it is that you are responsible for no upkeep or maintenance – even a clogged drain is fixed for you. Another benefit of renting is that you can stay in the same town without all of the expense associated with owning. The downside, of course, is that you aren’t building equity so it might not make sense financially.
  • Colonial_Village_Apartments,_Dallas_Baptist_UniversityActive Adult community – Sometimes known as “55+ Communities,” active adult communities are a great option if at least one person is 55 years of age or older. Active adult communities can be condominiums, cooperatives, single family homes, or even mobile home parks. The benefit of an active adult community is the opportunity to choose a community of people in the same stage of life. Many also offer amenities such as community swimming pools, clubhouses, tennis courts, and so on.
  • Continuing Care Retirement Community – A CCRC offers lifetime housing with advanced levels of care available as needs change. CCRCs also offer planned activities such as luncheons and parties for residents to get to know each other and socialize. Many offer bus trips to grocery stores and destinations such as the Jersey shore. CCRCs require an entrance fee and a monthly charge for care which is dependent on the level of support required.

When you decide where you want to live and the type of housing that appeals to you, it’s time to consider getting your current home on the market. At this point, you should contact a real estate professional who can help you determine what you need to do to prepare your home for sale as well as help guide you to finding your new dream home!

 

Earlier posts in the series:

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What’s Included in a Mortgage Payment?

When you found your dream home, you used an online mortgage calculator to determine what your monthly payments would be.  You may be surprised to know that your mortgage payment is not only the money you owe for buying your home. It actually includes several other payments that must be made on a monthly basis, thereby increasing your monthly mortgage payment.

What’s included in a monthly mortgage payment?housecalc

Principal – A portion of the money you borrowed to buy your home is due each month. Depending on the structure of your loan, your principal amount will increase each time you make a payment.

Interest – The mortgage lender will charge you interest. The amount of interest you pay each month decreases the same amount that the principal increases, keeping the Principal and Interest portion of your mortgage payment the same from month to month.

Real Estate Taxes – When the mortgage lender owns most of your home, they will pay the real estate taxes from your escrow. Each monthly payment will include 1/12 of your total real estate tax bill. The mortgage lender will ensure that the payment is made each month.

Insurance – When the mortgage lender owns most of your home, they will require that you maintain a homeowner’s insurance policy to protect their interest. Each monthly mortgage payment will include 1/12 of the total annual insurance cost and the mortgage lender will ensure that payment is made each month.

Private Mortgage Insurance – Buying a home with a smaller downpayment creates a greater risk for the lender. To compensate for that risk, the lender will require that you pay Private Mortgage Insurance. This will increase your monthly mortgage payment.

Do Mortgage Rates affect when you buy a home?

The factors that people use to determine when they are ready to buy a home are probably as varied as people themselves. But there are two factors that are prominant in making this decision:

  • Family situation – new baby, new marriage, new job, retirement
  • Financial situation – savings for downpayment, paid off student loans, inheritance

I’d like to suggest that potential buyers consider a third factor – mortgage rates. While there is no magic crystal ball, economists can use historical data and economic data to predict how mortgage rates will change.

Most economists predict that mortgage rates will be about one point higher in 2016 than they are in 2015. How does that affect your buying power?

Waiting to buy your home until 2016 will cost about $59 more per month or $21,260 more over the lifetime of the loan compared to buying a home today.

So what are you waiting for?

mortgageratesjuly2015

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