If you’re looking to retire in the near future, there could be a variety of financial perks for purchasing your retirement home now, rather than waiting until after you retire. In this Zillow Porchlight article, Daniel Bortz shares 5 reasons why you should buy your retirement home while you’re still fully employed.
Easier to get approved for a mortgage
When mortgage lenders evaluate your loan application they look closely at your debt-to-income ratio (DTI) — your total monthly debt divided by your gross monthly income — which is going to be a lower, more favorable percentage while you’re fully employed.
Therefore, it’s easier to qualify for a home loan while you’re still earning a steady paycheck, says Mary Erl, a certified financial planner at Nest Builder Financial Advisors in Gurnee, IL.
Moreover, “by waiting until you’re retired to apply for a mortgage, you could be limiting what size loan you can qualify for,” says Todd Sheinin, a mortgage lender and chief operating officer at New America Financial in Gaithersburg, MD.
A head start on paying off your mortgage
Ideally you want to be debt-free in retirement, which is why many retirees decide to rent rather than own, says Erl. But if you choose to become a homeowner, the earlier you purchase your retirement home, the sooner you can start paying off your mortgage.
Additionally, by starting to tackle your mortgage debt while you’re still actively working, you’re in a position to accelerate your payments — a move you may not be able to pull off when you’re living on a fixed budget in retirement, explains Pitzl.
Plan better for the long term
Currently, one of the biggest challenges is predicting what your living expenses will be in retirement. It’s tough, given that you don’t know how much you need to budget for housing.
By buying your retirement home now, you’ll get a better picture of what your monthly expenses will be in retirement — and that means you can create a more accurate budget.
“If you have a mortgage in retirement, it’s probably going to be your largest monthly expense,” says Erl. “Knowing what your [monthly] mortgage payment will be is extremely beneficial.”
[Read the full article: Why you should buy your retirement home before you retire]