How seniors can avail of mortgage to downsize into a new property

A Senior’s Guide to Owning Property, Applying for Mortgage and Preparing for Retirement

What’s on the other side?

While this question bothers a lot of people that are living in their golden years, it’s something that most of us will experience. And for those who are strong-willed, who want to make the most out of the remaining years of their lives, embracing this reality can help you make the best decision yet, especially in anticipating expensive house-related maintenance expenditures

Downsizing Makes the Golden Years More Vibrant

To answer the rhetorical question, the idea of living minimally is what’s on the other side as you age. Some may disagree with the idea of downsizing due to a handful of concerns. The number one reason they have to face is leaving their current home where they raised their family, watched their kids grow up and have a family of their own and built fond memories. 

Indeed, this falls on the sentimental side which is valid for most, but the question remains: does it address the practical side of what lies ahead to make your remaining years more meaningful and vibrant?

When planning for your retirement, you can think of many ways to spend your, as they say… best years ahead. However, it’s best to begin removing financial obligations off your plate so you can plan well. You’ll realize this the moment the children move out and you have a lot of available space in your house while you still have the responsibility of paying your current mortgage, utilities, insurance and maintenance.

Financial Traps to Avoid

Embracing the idea of downsizing can be disappointing later on if not planned properly. Whether you are financially able or not, as your golden years approach, you must have a sense of willingness and fulfillment. 

It’s important to be aware of financial traps. One is the lack of awareness of the expenses involved. If you’re moving from a bigger house to a smaller one, it’s recommended to have a cost analysis done.

Identify your financial responsibilities such as real estate, legal fees, moving expenses, etc. It’s difficult to be in a situation where you may be surprised with unexpected costs.

Another damaging mistake would be speculating over property values rather than seeking professional guidance. The driving force for your decision should be your need to change lifestyle, forego the maintenance and upkeep of your property or maybe even seek out a more adventurous lifestyle.

Applying for a Mortgage

Applying for a mortgage with your trusted mortgage broker who’ll be of assistance every step of the process and protect your interest. 

What brokers will do initially is to verify your income and credit history. This qualifier is paramount since you don’t want to borrow beyond what you can reasonably pay.

Reverse Mortgage and Other Options

Reverse Mortgage is a type of mortgage option wherein you are allowed to borrow up to 55% of your home value. In the majority of reverse mortgage cases, the principal and interest are only repaid either when the property is sold or the owner dies.

Refinancing is fairly the simplest option for you as it allows you to borrow up to 75% of your house value.

Home Equity Line of Credit (HELOC) offers you flexibility since you can adjust how much you need. You can borrow up to 65% of your home’s value. 

Staying Vigilant Against Real Estate Fraud

If there are people whom you can trust in the mortgage industry who’ll have the initiative to help and protect you, definitely, there are those who may take advantage of your circumstances and yes, scam you. You have to stay informed and anticipate the behavior of predatory agents, brokers, etc.

The most common fraud that many fall prey to is title fraud. The antidote for this to inquire about registered forged documents. Scammers have the ability to transfer property for themselves by discharging mortgages, so be wary of this. 

Beware of those who can steal identities and pretend that they are the true owners of the property. Always secure your information as they can claim mortgages on the property and steal your hard earned savings. To protect you from these predators, make sure you understand every document before signing. 

If you are doubtful about it, have the courage to refuse no matter how pleasant that negotiator is. Remember to protect yourself and don’t be a victim!

Conclusion

The biggest benefit of downsizing is the investment. Investing in real estate is one of the best choices you can make. By renting out your older, larger house, you can use the proceeds as additional income. This will give you positive cash flow. Now, Isn’t that a more enjoyable way to enjoy your golden years?


Daisy Raouph, CLU, CHS, specializes in mortgage financing solutions and financial services. A Mortgage Broker and Financial Security Advisor with over 30 years of experience in financial services. Contact us today to review your mortgage financing options. We can help!