10 Sep Should Buy Your Retirement Home Before You’re Retired
Hilton Head is an amazing place to live no matter what stage of life you are in, but it really shines as one of the country’s top retirement destinations.
From pristine beaches to lush maritime forests, Hilton Head is full of amazing golf courses, world-class amenities, a perfect climate, outstanding dining & entertainment, as well as a host of other qualities that consistently help it rank on several top-ten lists.
Most recently, Southern Living named Hilton Head the top beach town of 2019…..no small feat considering the competition!
So, we know it’s a great place to live, especially for retirement, so make sure you read our Ultimate Guide To Buying A Retirement Home on Hilton Head. In that article we looked at several things to consider in choosing the property, location, and even cost.
Today, however, we’re going to talk about why you should go ahead and buy that retirement home before you’re retired! Specifically, we are going to highlight the top 5 reason that you should pull the trigger now, rather than later.
Test Drive Your Retirement Home: 5 Reasons Why You Should Buy Your Retirement Home Before You’re Retired!
1. Easier To Get Approved For Financing
This definitely is the number one reason to buy your home before you retire. Even after all these years, banks still are very conservative when it comes to getting a mortgage loan. One of the top three “risky borrowers” named by bankrate.com is retirees.
Not only are banks looking at life expectancy, but there can also be many unforeseen financial issues as we age, and banks are a little leery about lending money.
However, when you are still gainfully employed, have good cash flow and debt ratios, the banks are still in love with you. You can also typically get even better interest rates for being a lower risk (on top of the already low interest rates that are currently being offered.) No one knows the future, but we know these rates can’t last forever.
Also, while still employed, there may be unexpected (and delightful) bonuses or other large sums available that can go towards paying down the principle before your income becomes more fixed at retirement.
In addition to rates, you can put yourself in a better financial situation by choosing a shorter term loan. Rather than a traditional 30 year mortgage, you could choose a 15 year mortgage and be in a much better financial potion as you near your final retirement date. Also, a quick note here, even if you intend to pay in cash, it’s better to finance your home while retirement is still a few years off.
A lot can happen over 5-7 years and if the market changes or another financial crisis occurs, you haven’t tapped your nest egg too early.
2. More Cash For Renovations
We know most homes today will need a little work. If you can’t quite find the perfect home, you can surely remodel an existing home into exactly what you want. Doing this early before retirement will help with cash flow.
There are a lot of good reasons to buy a new construction home rather than to renovate one, as we talked about here, but if you’re not moving in right away, you are in the best possible situation to take on a remodel or even a whole-house renovation.
Planning for retirement definitely includes planning for your home, and given the length of time that Hilton Head has been popular, we are now seeing beautiful older homes that have been done-over once or twice ready to hit the market again.
This puts you in a prime position to snag a house in a much better location on the Island and in some of the more sought-after locations.
3. Know The True Cost Of Your Home
No real estate advice would be complete without this one – make sure you know what your house will cost after you close! This is where the real planning comes in and owning the property for a few years out before you’re retired can save you from some major surprises…..and future headaches.
It’s easy to figure out a home’s monthly expenses, but what if there are more repairs needed than you thought? (This is a good place to inject the importance of getting a home inspection!) What if you once you move in you decide you’d like to redo the lighting? Maybe redo all of the window treatments? Perhaps add some smart-home technology? These are all great things to decide to add….before retirement!
Owning your retirement home early will give you an accurate idea of budget and show the true cost of ownership. This can help ensure that you have enough saved to retire and live comfortably in your new property, with no surprises for your budget. You’ll be in a better position to create a financial plan once you know the reality of owning your new home.
4. Get The Home You Really Want
If retirement is on the horizon in the next 5-7 years, another reason to get that little love nest now is that it just might be gone before you decide that you’re “officially” ready! Living in a resort community has taught all of us a few things.
First of all, even in a downturn, a high demand area like Hilton head isn’t affected by “bad trends” as much as other communities. Since people from all over come here to live and retire, the pool we pull from is vast. Even when the market is at its worst, there still are folks who are lining up, who never miss a beat. They are ready to move regardless of the economic indicators on Wall Street.
Also, as time goes on, property values and demand will almost always increase in desirable areas. So, the cute villa you looked at two years ago just might increase in price by 20% when you finally decide to retire.
Take this story I tell often about my dear friend’s father coming to visit. When my friend first moved here in 1997, his parents came to visit and he was showing them around the Island.
They were walking down North Forest Beach looking at all the little bungalows a few blocks from the beach and his dad remarked, “that is where I would love to buy a little cottage.” Oh, if he had just bought back in 1997!! Just a few years later, that 2 bedroom “shack” cost about 10 times as much and the whole area had increased drastically in value all but shutting him out.
The same can still happen here today (perhaps not quite the skyrocket increase) but you can beat your bottom dollar. The truth is, year over year prices are steadily increasing.
5. Test Drive Your New Neighborhood
This last tidbit is not new advice, everybody from Kiplinger’s to financial planners suggest living in a new area before you actually buy a piece of property. However, taking an extended vacation or trip of six, seven months, or even a year, is not the same as experiencing your new home throughout several seasons and years.
Remember things change, most of all us! You may think living in Sea Pines is an adventure and that’s it’s super-cool to have The Heritage in your backyard……until you’ve done it 3 or 4 years and you can’t take the traffic or inconvenience of the annual golf tournament.
Owning your home long before you plan to make it your full-time residence will really help you understand life in the Lowcountry. We doubt you’ll find any reason to move off the Island, but you may change your mind on location or property type after a few years.
If that’s the case, you can go back to square-one and purchase something else (now knowing exactly what you want) and the house purchased a few years back will now make you a sizable sum to put towards your “officially perfect retirement dream house!”
Even simple things, such as too much sun or too many pine trees, can spoil your taste for a house (and take it from us, there really is such a thing as too many pine trees!) Buying a home early and really getting to know it will not just just help with expenses as we mentioned above, but it will show you the quirks (if there are any) and give you time to make sure it’s the spot you want to stay in forever.
Think Long-Term To Find That Perfect House!
We also spoke to Pat Sokolowski with Metis Wealth, a local financial planner here on Hilton Head what else we should be looking for when thinking about buying a retirement home, and she had valuable advice.
“If you are contemplating a move in retirement it may be worthwhile to set down some roots before you actually retire. Working couples who regularly vacation in another locale can enjoy the perks of owning their own vacation condo/home while possibly offsetting the cost with rental income. Hilton Head Island is a particularly good location for this with the large number of vacationers. You may be able to cover many of the costs of second home ownership (such as property taxes, utilities, and maintenance) by renting out your property. At the same time it allows you to make friends in your new neighborhood and get involved in your future retirement community. The best times to consider a purchase are when the interest rates and property values are low. Be cautious if you sense that values are at an all-time high (as they were in 2007-2008) as you may be taking on additional risk.”
The rental market in Hilton Head is extraordinarily conducive to making your retirement home lucrative for you well before retirement, buying early allows you to treat the property as a rental to offset the costs of ownership . We are planning some more expansive info about the real estate market in the Lowcountry, so make sure to like our Facebook page to get notifications when we have a new article published.