Now That You're Retired, Can You Afford To Buy A Second House?
You want to retire in an area with plenty of recreational and cultural activities, great weather, and close to their family. But sometimes, this isn’t always possible if you stay in your pre-retirement home.
Buying a second home can be a great solution - but you need to make sure you can afford it, first. Consider it carefully.
Understand Your Income
Sources of retirement income are:
Pensions
Individual Retirement Accounts (IRA)
Stock dividends
Annuities
Rental real estate
Social Security
With this, make sure to create a budget. Track all of your expenses for a month and subtract them from your monthly income. The amount leftover could be the amount you have to spend on a mortgage payment.
Understand Your Expenses
The U.S. Bureau of Labor Statistics states that retired households across the country spend approximately $41,000 per year. Housing-related expenses account for more than $14,000 of this amount. These may be slightly lower if your first home’s mortgage is paid off, but remember that you still have property taxes, home insurance, maintenance, repairs, utilities, HOA dues and other related housing expenses.
Other relatively expenses include health insurance, medications, food, and transportation. Your overall lifestyle - golfing, traveling, and going out to eat - increases your annual expenses as well.
Can You Afford It?
First, think about about if you can afford to make a down payment. A sizable down payment creates lower mortgage payments, too. You need to ensure that you have money available to make the mortgage payments, to maintain the home, furnish it, and insure it. Use a mortgage calculator to help you estimate affordability.
If you have money for a downpayment but the mortgage is too high, consider increasing your income. For example, you can use Airbnb to generate income from an empty home. You may also be able to find a part-time job working from home.
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