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About a quarter of Americans age 60 and over have considered moving to a cheaper housing market and using the equity in their homes to upsize their retirement savings — making retirement more secure and enjoyable, via Nerdwallet. From closing costs to family proximity, here are the things to consider before selling your home to pad your retirement account:
1. Assess the market
Selling (and potentially downsizing) your home and pocketing the equity is a good strategy in a market where you can make it work. This is easier in pricier housing areas, when you may be able to trade your high-value home for a smaller place in a more affordable market.
Selling property also isn’t a slam-dunk task. “Just because you want $800,000 for your home, the market may not care,” says Andrew Herzog, a CFP in Plano, Texas. “You may be in the mood to move, but if nobody wants to buy your place in the first place, you’ve got nothing.”
Additionally, you have to make sure you can afford to buy a replacement home that you like. Check home prices in your desired location before putting the “For Sale” sign out.
2. Research the costs
Make sure you understand property taxes and the basic costs of living in your desired locale, as well as the costs for selling your home. (Hint: The real estate agent commission is generally about 5.5%.) Also, if you’re picking up a mortgage on the new home, there will be closing costs, and rates are probably higher than they were when you last purchased property. All these numbers could chip away at your net sale profit.
In an area with a very low cost of living, do some digging to make sure you understand what to expect from the municipality. Are the streets and sidewalks maintained? How is garbage collected? Is the fire department responsive?
3. Weigh current price of unkeep
Keeping your house could mean maintaining a big yard, replacing an old roof and managing a second-story primary bedroom into your later years. Selling gives you a chance to downsize your responsibilities and look for something that makes it easier to age in place. Moving to a home with less to clean and fewer stairs can make it easier to stay in your home long term.
4. Think about family
You don’t necessarily have to move closer to loved ones — but it’s helpful.
5. Test-drive the location
If you’re buying in a new city, visit in every season to ensure you like the area year-round, even in the snow or blazing sun. Vacation there if you can.
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