Are there any common pitfalls to watch out for as a senior citizen buying a first home? What are common senior home buying mistakes in NYC?
Assuming you can’t get a mortgage as a senior citizen
This is the most common of senior home buying mistakes in NYC. Even though some mortgage bankers may blink if a 75 year old senior citizen requests a 30 year mortgage, it is illegal for the mortgage banker to discriminate based on the applicant’s age! In fact, mortgage bankers may not even suggest to an elderly person that they may not live long enough to pay off a mortgage!
Elderly loan applicants will be judged the same way as younger borrowers. A mortgage banker will examine their credit history, last two years’ income per their tax returns as well as projected future income. Since an elderly person may have more income and/or assets than a younger person, it may actually be easily for mortgage bankers to qualify the older person!
Being deceived by predatory mortgage lenders
Elderly home buyers can easily become victims of predatory lending practices by unscrupulous mortgage brokers out to make quick buck. Fortunately, a few recent pieces of legislation such as the Truth in Lending Act (TILA) require lenders to disclose the cost and terms of a loan.
The Real Estate Settlement and Procedures Act (RESPA) act prohibits kickbacks and referral fees from mortgage lenders to other interested parties such as real estate brokers. Though excessive regulation often stifles business, these Acts came out after the excesses of the subprime housing crisis and are quite beneficial to elderly home buyers who may otherwise be preyed upon by dishonest mortgage brokers.
Taking on too much leverage
Dangerous senior home buying mistakes in NYC include taking on too big of a mortgage to purchase a pricey New York City home. Many senior citizens are already retired, living on a fixed income or drawing from their retirement accounts. Furthermore, many senior citizens living in homes with mortgages that are long paid off will not be used to having a heavy monthly mortgage expense. Lastly, it may simply be uncomfortable and not relaxing during retirement to have a heavy debt burden! One way to alleviate the burden of having monthly payments is to do a reverse mortgage on their existing home.
In a reverse mortgage, a home owner can borrow against the existing value of their home. No repayment of the mortgage interest or principal is necessary until the home is sold or the home owner passes away. It is possible to purchase a second home from the proceeds of a reverse mortgage. This is a great option for senior home buyers whose net worth is tied up in their current home.
Overpaying for movers
You’ll most likely need the help of professional movers after purchasing a new home, even if you have friends and family who are willing to help. It may simply be less burdensome to hire someone than to ask your family to take time off work to help with your move.
Senior home buying mistakes in NYC when it comes to moving include failing to get quotes from several companies. A good moving company should be able to either quote you a flat fee for everything or a specific hourly rate. An easy way to overpay is to sign up with a company that is wishy washy on how much it’ll cost. If you don’t agree on the cost beforehand, you’ll be bound to be stuck with as large of a bill as they think they can get away with.
Refusing to downsize
The kids are gone and you’ve got empty bedrooms in your spacious NYC apartment. More likely than not, you’ve also got a generation’s worth of clutter lying around the apartment. It can be emotionally taxing to simply let go of a place and things that have so much history and meaning to you. However, it can be equally freeing to simply let go of all the “stuff” in your life.
A 3 bedroom apartment is incredibly valuable in NYC today. Perhaps it makes sense to sell your apartment and re-invest the proceeds in a smaller 1 bedroom or studio condo with low monthly costs? Better yet, take out a reverse mortgage on your 3 bedroom apartment to purchase the smaller apartment and rent out your old 3 bedroom apartment!
Not only will downsizing simply your life, your new smaller home will be much easier to maintain. You’ll have lower upkeep costs as well! In terms of clutter, ask yourself whether you’d actually purchase the item again if it was lost. If the answer is no, then you don’t need it!
Lastly, downsizing may be a great excuse to get closer to your family. Moreover, having a huge apartment may not be convenient for elderly people who have recently become less mobile. The benefits of living a simpler life abound!
Disclosure: Hauseit and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. The services marketed on Hauseit.com are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).