What To Do With Your Home If You Are Downsizing
As you grow older, downsizing to a smaller, more manageable home seems like an increasingly attractive option. However, that doesn’t mean it isn’t a complicated process. Before you even start dealing with the move, you need to decide what you are going to do with your existing family home. In this article, we will go over a few of the basic things to keep in mind.
Selling the House
This is perhaps the most obvious solution, and the one most people choose. After all, most people will need the cash from a home sale in order to be able to afford to buy a new place. However, it’s important to actually understand the local market before deciding.
According to the Triangle Multiple Listing Service, the average home in Chapel Hill sells for $400,000, and homes take an average of 62 days to sell. This is because Chapel Hill is not a particularly competitive market. What this means is that you cannot be guaranteed a quick sale.
This becomes especially relevant if you are selling a big family home. According to Business Insider, the large multi-bedroom homes owned by boomers are becoming harder to sell to the younger generation. In other words, your big house may be hard to sell, and you are less likely to make as much profit from downsizing.
There is also the matter of downsizing your possessions. Selling the house means you likely have to get rid of many items and furniture. You need to be organized and have a plan to make sure you don’t get overwhelmed. My Move recommends starting early and starting small, prioritizing the rooms you won’t have in your new house (like an attic or home office).
Renting Out the House
Renting out your house is a great option if you plan to sell the house someday but would rather hold onto it for now. Rent does not bring in a big cash sum, but it can provide a regular, ongoing source of income. This can be more convenient in terms of cash flow for someone on a fixed retirement income.
The average rent for a three-bedroom apartment in Chapel Hill is $1,875, and this is likely to be higher for a house. If you are looking to rent a one-bedroom apartment in the city center (average rent $1,068.75), you could be looking at a net monthly profit.
If, on the other hand, you are buying your new home, things can be a bit more complicated. For seniors, Bankrate recommends looking at 10-year or 15-year mortgages, which will allow you to pay off the smaller home faster. Using the SmartAsset calculator, we can see that a 15-year mortgage on a $400,000 home, with a $50,000 down payment, would cost almost $3,000 a month. If you wanted to pay off your mortgage with your rent income, your down payment would have to be as big as $200,000.
Of course, these are all approximate figures, which will vary pretty significantly. It is worth noting that a senior could get a traditional 30-year mortgage, which would be a lot easier to finance using rent income. However, experts do tend to recommend seniors minimize debt in retirement, and this may not be the most convenient option.
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Keeping It in the Family
This is obviously the best option if there is someone in the family who actively wants the home. There are several options here, from giving the house as a gift to passing on the mortgage to your family member. Each has its own tax implications, so do plenty of research before deciding. For instance, if you try to sell your house to a relative for a big discount, the IRS will still count this as a gift, and the gift tax will apply.
Deciding what to do with a family home when downsizing is never an easy choice. There are a lot of complex financial factors but also significant emotional and practical ones. For this reason, you need to give yourself plenty of time to consider all these carefully and discuss them with your family if needed. In other words: When it comes to downsizing, don’t rush things!
Real Estate Experts can help you evaluate your home and help you make the decision about selling or renting. The foundation of our business is that is It All About You. Our goal is to help you make the best decision that meets your family goals. Contact us anytime!