The average senior has $130,000 in home equity. That makes the home the most valuable asset most seniors have. Of course, valuable assets can also be significant drains—in the form of repairs and upkeep, property taxes, and in some areas, falling property values. So how can you determine whether your home is an asset or a drain? And what should you do with that information? Here are five key questions to ask yourself.
Can I afford my home?
The simplest and most direct question you must answer is whether you can afford your home in retirement. Not only must you be able to make mortgage payments and cover property taxes. You’ll also need a small fund to cover the inevitable repairs and upkeep expenses that come with home ownership. If your home needs, or will need, significant repairs, this fact must factor into your considerations about whether you can afford your home.
Is my home an investment?
Virtually everyone buys their home as an investment, but not all homes become an asset. Some turn into money pits, particularly if they need a lot of work or the property values in the surrounding area plummet. Consider how much you’ll make if you sell your home, and whether that value is likely to increase or decrease over time. Though this shouldn’t be a determining factor, this should weigh on any decision you make about keeping or selling your home.
Can I tap into my home’s equity if I need to?
Your home can provide you with access to cash if you really need it. A home equity line of credit is one option. For seniors over the age of 62, there may be an even better option in the form of a reverse mortgage. A reverse mortgage offers you money from your home’s equity. But unlike a traditional mortgage, you don’t have to repay the loan as long as you remain in your home and follow the terms of the loan. If you’re concerned about finances in retirement, a reverse mortgage can ease your anxious mind.
Can I manage my home?
Decisions about whether to keep your home aren’t just about finances. You should also consider whether you can continue managing your home on your own. If you can’t, what will be the cost to you to hire someone else to manage cleaning, landscaping, and other routine forms of upkeep? Can you afford that? Do you want to? Consider also issues of safety and convenience. Can you still use all the areas of your home? Is it safe for you to do so? Are there steps or a steep hill you must climb to access your home?
Would living somewhere else be cheaper?
The most important question to ask yourself if you’re contemplating a move is whether it would be cheaper to live somewhere else. The answer is often a resounding no. Even if your house isn’t as affordable as you might like, there’s a dearth of affordable senior living options. Explore your options before you begin planning for a home sale. You might find that your home is more affordable, at least compared to other options, than you think.