How to Use the Equity in Your Home to Buy a Home in Retirement

Whether you’ve just retired or you’re just thinking about retiring, you may be dreaming about the next stage of your life. You’re not alone. Research from the Retirement Industry Trust Association (RITA) shows 10,000 Baby Boomers reach age (65) every day in the US, and fewer than half of the people in that generation have already retired.

If this sounds like you, one thing worth considering is whether your current home will suit your new lifestyle or allow you to comfortably age in place.

Does your current home have the features and benefits you’re looking for in retirement?

Maybe you want single-level living, I know my knees do some days. Or perhaps you’re looking for less home maintenance, or greater security so can have the peace of mind to just lock the door and travel. 

The good news is, you may be closer than you think to having your dream retirement. 

Home Equity has Risen Along with Home Prices

If you own your home, you’ve likely built-up a significant amount of equity. That can help you fuel your next move, whether you’re  downsizing, moving to a 55+ community, moving closer to family, or moving to your dream destination—mine’s Italy.

According to the National Association of Realtors (NAR), a homeowner who purchased a typical home five years ago has gained more than $125,000 in home equity from just price appreciation alone. Yep, we’ve all heard about how much home prices have risen. And those rising prices will increase your home’s value when you go to sell.

Chance are, you have lived in your home much longer. According to NAR’s 2022 report on generational home buyer and seller trends, on average, homeowners age 55 and older has lived in their current home for 13 to 17 years.

I’m one of those folks. In fact, I’ve lived in my home even longer, and I know that the south Minneapolis house I purchased 20 years ago is now worth three times what I paid for it.

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If you read my previous column, “Can You get a Mortgage if You’re Retired?”, you already know that getting a mortgage while you own your current home may be difficult if you’re already retired.

And, in this sellers market, writing an offer on a new home that is contingent on the sale of your current home is going put you at a competitive disadvantage with other buyers who can pay cash or don’t need to sell a home to buy.

Use Your Home Equity to Purchase Your Retirement Dream Home

But, if you sell your home first, you can use all that equity you have accrued to purchase your next home with cash.

In my experience, being a cash buyer often puts you at the top of the offer pile.

If you’re wondering, homes in the Twin Cities are still selling quickly and many are getting multiple offers. Just last weekend, a small home in South St. Paul that one of my clients was interest in had 15 offers in the first weekend.

So in this market, you can see that it really makes sense to make sure you can put in a strong offer. That often means selling your current home before you buy your next home, especially if you’re retired.

The Challenges of Selling Before Your Buy

Selling your home before you buy you new home does come with some challenges. You may have to find a temporary place to live while you look for your next home. But, as I said, having that cash is going to make buying that home a lot easier.

If you want to find out how much equity to have in your home, reach out to a trusted real estate professional today.  

Retirement is a big step and so is buying or selling a home. Make sure you have an expert to guide through the selling process and to help you buy a home that will better suit your needs now and in the future.

J Trout Lowen Realtor Minneapolis

J Trout Lowen is a Minneapolis REALTOR and an expert at helping homebuyers and sellers navigate the Twin Cities housing market.

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