Whether you’re approaching retirement or you are a young person, you’ll probably want to be able to retire with a certain amount of financial comfort. Many people dream of owning a second retirement home, and regardless of if your retirement dream home is on the coast, next to sandy beaches, in the mountains or anywhere else for that matter, it’s important to know the best time to invest in a retirement home and what sort of considerations should be made.
With home prices being so low at the moment, many experts would say that now is the ideal time to purchase retirement home, even if retirement is years away. Since the housing market is still in flux and has yet to find its bottom, home and mortgage prices are expected to stay low for an extended period of time
Of course, what people often wonder about is the affordability of a second home purchase, especially when they are paying a mortgage on their first home. In addition, with as tight as lending has become, it’s difficult for banks and other lending institutions to approve a qualified buyer for one mortgage, let alone two. However, there are other potions when paying for a retirement home while still paying on a current mortgage.
Renting has become a tool that many home owners are using today for a variety of different reasons. Renting can be an excellent way for an owner of a property to generate cash flow.
If you are questioning whether you can afford to finance a retirement home, renting may be your best option. This will allow you to cover the costs of your second mortgage without feeling a huge financial strain. There are, however, a few things that you want to consider when renting a home.
Being a landlord isn’t for everyone, and you may want to consider hiring a property management company. This could eat into your profits somewhat, but this will allow the property to be managed, taking the burden off of you to manage a potentially distant home or property.
Another option is to purchase a landlord insurance policy. These policies will cover you against any legal fees that might arise from legal disputes between yourself and the tenant. It will also cover any damage to the property that may occur through tenant neglect or an act of nature. It will also compensate you for lost rent while the property is being repaired or if a tenant skips out on their lease early.
If you’re in a position where you can purchase a second home for your future retirement, whether you plan on leaving it empty or renting it out, you do need to be wise in terms of your investment. You will probably have to put a significant amount of money into the purchase of a second home, even if it’s a modest home. That’s because you’re going to need a down payment for a loan or the money to buy the property outright.
In these situations, you want to be very careful to not over extend yourself. Your retirement money/investment portfolio should be left untouched by this retirement purchase. Figure out a way to do it within your existing budget and be very careful about dipping into your retirement capital in order to fund a retirement home purchase. Talk to experienced financial advisers who specialise in refinancing, (Australian readers see Smartline mortgage brokers). Taking a small amount of money out may not affect your retirement significantly, but larger amounts can leave you scrambling and can put the financial comfort you plan for your retirement in jeopardy.