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I realize there are multiple threads now and over time that touch on various parts of housing use and cost in retirement. This is a nice comprehensive article on the overall impact of housing on our retirements and perhaps a cautionary for folks in the planning stage on what financial behaviors can come back and bite us big time in future years.
For many the price being paid is from decisions previously made and crashing housing prices that leave them still under water. Transplanting may not be the option for them it is for others. A met a couple one year while on vacation who wanted to move from up state NY but there paid uphouse value was so small that pulling all the equity out didn't give them enough money to be able to afford moving to where they wanted. Where they could afford to move to what not desirable or on their list of wanted areas of the country. NC was a desired state but the areas of the state they wanted unaffordable. They were feeling trapped and using time shares and travel as their fun time. They were not fully retired and he was still working as a DJ and why not being fully retired in place wasn't a big whoopee. Other folks are trapped having to continue working by debt and still owing a lot on their houses because of equity taken out. For those of us in or from higher income areas we probably all know folks who would have six figure retirement incomes and are unable to retire because of debt much of it housing. What I find interesting and am going to try to find followup news is about the problems folks are having in the Villages a conservative well established retirement community. This could be a structural problem facing other senior housing communities like Del Webb as their populations age in place. Again a good read and food for thought as we either do or don't plan for our future years.
The following is from the link and is really food for thought as the husband was a tax accountant advising others on their money and oh well ever look in the mouth of your dentists kids?
As we also know home ownership and or rental all come with issues of their own related to upkeep, condo associations, rent increases, land lordsetc.
I don't feel like a senior "buried by housing debt" but maybe I'm in denial. lol Some folks think I'm crazy to be buying a home at my age and others think it's great. But I'm not planning on using my home as a 'bank' and I plan to live here till I 'expire'. I owe $83,000 on my house, have a car payment...that I could pay off today, if I wanted...and about $600 in credit cards, that WILL be paid off today. That's it. After doing a ton of 'thinking about it' I decided to buy a house because, for me, it's cheaper than renting. AND I don't have a landlord telling me what I can and can't do with my home. For some reason that's really important to me. I have mortgage insurance for 'just in case' so don't worry too much about that. And I'm still working. As much as I'd LOVE to retire I've made my peace with the fact that I will never be able to and it's okay. I'll just keep telling myself that it "keeps me young". lol
For some of us, using a home as an investment rather than a bank pays off. As long as people don't keep re-financing and taking out cash, equity can be a big help in retirement. While we're still a few years away, when we retire we are on pace to be mortgage free by selling at current prices and taking the equity to pay cash in a lower cost area. Staying would be a financial challenge, despite a low mortgage of $1,400/month, because the taxes are now at $800/month and rising all the time.
Yeah, the examples given in the article are folks who used their houses as banks, so to speak, used the equity for who knows what, that money is gone now, apparently unaccounted for and they are left with huge mortgages they cannot afford.
Home equity loans don't have to go that route if one doesn't fritter away the money, but keeps tab on what is spent and is diligent in ensuring they pay back what they spend ( more than just the interest monthly) and don't spend more than they could pay back.
We did it. I have posted about this before but we paid off our house in Miami in 2000. As part of our retirement plans we had purchased a lot in the area where we planned to retire and wanted to build a house on it. We obtained an equity line of credit on our paid off house ( for $250,000, at the time it was appraised at about $600,000-inflated as this was in 2003, but we didn't want an equity line that high as we knew we couldn't really afford to pay that back and the amount we asked for was enough tk build the retirement house. This equity line was our only mortgage, and I made sure we paid back monthly as much money as possible so it would be available as we needed it. The interest rates on this equity line were around 4% so that helped too. We ran into numerous issues during that build, (hurricanes in Florida and related miseries) so it took a few years to build that house. In the meantime we used that equity line to pay off our cars, bought another one, and repairs on our old house as needed. The key was, I am sure, to put back the money as we were able so as not to increase equity debt.
By the time our retirement house was finished and we were ready to sell our old house and move to the retirement house, the amount of debt we owed on that equity line was pretty close to maxxed out-maybe 10,000 left. We had used that equity line to put a new roof on the old house, but that was the last item we needed to finance from that loan.
We sold that house for the asking price (450,000), and when we paid off the realtors attorney, and the equity line of credit, we had made about $171,000 in profit. That and we had a brand new house with no mortgage to retire to.
Personally, IMO we made that equity line work for us, and with some due diligence and realistic thinking it sure did.
For some of us, using a home as an investment rather than a bank pays off. As long as people don't keep re-financing and taking out cash, equity can be a big help in retirement. While we're still a few years away, when we retire we are on pace to be mortgage free by selling at current prices and taking the equity to pay cash in a lower cost area. Staying would be a financial challenge, despite a low mortgage of $1,400/month, because the taxes are now at $800/month and rising all the time.
$800 a month holy crap!
We did what you are talking about. When we were looking to buy, the county we currently lived in sure like to tax and raise taxes. We saw a beautiful home in the same high tax county but opted to move to another county with lower taxes. It made a big difference in our payments and in if we could afford to stay in our post retirement years.
Yeah, the examples given in the article are folks who used their houses as banks, so to speak, used the equity for who knows what, that money is gone now, apparently unaccounted for and they are left with huge mortgages they cannot afford.
Home equity loans don't have to go that route if one doesn't fritter away the money, but keeps tab on what is spent and is diligent in ensuring they pay back what they spend ( more than just the interest monthly) and don't spend more than they could pay back.
We did it. I have posted about this before but we paid off our house in Miami in 2000. As part of our retirement plans we had purchased a lot in the area where we planned to retire and wanted to build a house on it. We obtained an equity line of credit on our paid off house ( for $250,000, at the time it was appraised at about $600,000-inflated as this was in 2003, but we didn't want an equity line that high as we knew we couldn't really afford to pay that back and the amount we asked for was enough tk build the retirement house. This equity line was our only mortgage, and I made sure we paid back monthly as much money as possible so it would be available as we needed it. The interest rates on this equity line were around 4% so that helped too. We ran into numerous issues during that build, (hurricanes in Florida and related miseries) so it took a few years to build that house. In the meantime we used that equity line to pay off our cars, bought another one, and repairs on our old house as needed. The key was, I am sure, to put back the money as we were able so as not to increase equity debt.
By the time our retirement house was finished and we were ready to sell our old house and move to the retirement house, the amount of debt we owed on that equity line was pretty close to maxxed out-maybe 10,000 left. We had used that equity line to put a new roof on the old house, but that was the last item we needed to finance from that loan.
We sold that house for the asking price (450,000), and when we paid off the realtors attorney, and the equity line of credit, we had made about $171,000 in profit. That and we had a brand new house with no mortgage to retire to.
Personally, IMO we made that equity line work for us, and with some due diligence and realistic thinking it sure did.
Yeah, the examples given in the article are folks who used their houses as banks, so to speak, used the equity for who knows what, that money is gone now, apparently unaccounted for and they are left with huge mortgages they cannot afford.
Home equity loans don't have to go that route if one doesn't fritter away the money, but keeps tab on what is spent and is diligent in ensuring they pay back what they spend ( more than just the interest monthly) and don't spend more than they could pay back.
We did it. I have posted about this before but we paid off our house in Miami in 2000. As part of our retirement plans we had purchased a lot in the area where we planned to retire and wanted to build a house on it. We obtained an equity line of credit on our paid off house ( for $250,000, at the time it was appraised at about $600,000-inflated as this was in 2003, but we didn't want an equity line that high as we knew we couldn't really afford to pay that back and the amount we asked for was enough tk build the retirement house. This equity line was our only mortgage, and I made sure we paid back monthly as much money as possible so it would be available as we needed it. The interest rates on this equity line were around 4% so that helped too. We ran into numerous issues during that build, (hurricanes in Florida and related miseries) so it took a few years to build that house. In the meantime we used that equity line to pay off our cars, bought another one, and repairs on our old house as needed. The key was, I am sure, to put back the money as we were able so as not to increase equity debt.
By the time our retirement house was finished and we were ready to sell our old house and move to the retirement house, the amount of debt we owed on that equity line was pretty close to maxxed out-maybe 10,000 left. We had used that equity line to put a new roof on the old house, but that was the last item we needed to finance from that loan.
We sold that house for the asking price (450,000), and when we paid off the realtors attorney, and the equity line of credit, we had made about $171,000 in profit. That and we had a brand new house with no mortgage to retire to.
Personally, IMO we made that equity line work for us, and with some due diligence and realistic thinking it sure did.
Now THAT is a great 'success' story. I think some of what keeps people from doing things like that is the time element. They think that, gee, it takes so many YEARS to accomplish something like that, then they feel intimidated just thinking about it and don't do it. Those years pass by anyway, sometimes pretty fast, and then they regret not doing things.
There should be safety nets for people who get into trouble for reasons beyond their control. But people who chose to spend hundreds of thousands of dollars they didn't have and now say they "can't afford" to pay it back? That's a problem.
Agreed - this particular case in point is one of personal stupidity and irresponsibility. Still, there are legitimate cases where housing is expensive, there was a late in life financial disruption or whatever, and people are stuck in a difficult spot.
For some of us, using a home as an investment rather than a bank pays off. As long as people don't keep re-financing and taking out cash, equity can be a big help in retirement.
But see, there are far too many people who either A-don't understand very basic economics, or B- know what they're doing and don't care and have no intentions of suffering the consequences of a volatile market. Both subsets are now a problem for the rest of us. As long as they know there's a safety net below them, there's little chance for them to change, and this cycle WILL be repeated.
Using debt secured by your home to pay off UNsecured debt is dumb in the extreme. They won't come and repossess the vacation they financed on the credit card, but they will sure as heck take the house in foreclosure! Financially irresposibility gets zero sympathy from me.
Here's the one key statement from your link TuborgP:
"Foolishly, like so many Americans, we used the house as a bank,"
Nothing has change since 2008 on that .In fact it might point out that housing cost have risen more by lease/ rent market effecting those cost more than even housing prices . No equity was a big reason many loss their house in the crisis also. I kind of take these articles with a grain of salt as have to write something that makes authors home payment. Just as we now see saving rise when so many articles predicted consumer would spend the savings from lower gasoline cost. Do not belief half you see and nothing your read as is pretty accurate.
Yeah, the examples given in the article are folks who used their houses as banks, so to speak, used the equity for who knows what, that money is gone now, apparently unaccounted for and they are left with huge mortgages they cannot afford.
Home equity loans don't have to go that route if one doesn't fritter away the money, but keeps tab on what is spent and is diligent in ensuring they pay back what they spend ( more than just the interest monthly) and don't spend more than they could pay back.
We did it. I have posted about this before but we paid off our house in Miami in 2000. As part of our retirement plans we had purchased a lot in the area where we planned to retire and wanted to build a house on it. We obtained an equity line of credit on our paid off house ( for $250,000, at the time it was appraised at about $600,000-inflated as this was in 2003, but we didn't want an equity line that high as we knew we couldn't really afford to pay that back and the amount we asked for was enough tk build the retirement house. This equity line was our only mortgage, and I made sure we paid back monthly as much money as possible so it would be available as we needed it. The interest rates on this equity line were around 4% so that helped too. We ran into numerous issues during that build, (hurricanes in Florida and related miseries) so it took a few years to build that house. In the meantime we used that equity line to pay off our cars, bought another one, and repairs on our old house as needed. The key was, I am sure, to put back the money as we were able so as not to increase equity debt.
By the time our retirement house was finished and we were ready to sell our old house and move to the retirement house, the amount of debt we owed on that equity line was pretty close to maxxed out-maybe 10,000 left. We had used that equity line to put a new roof on the old house, but that was the last item we needed to finance from that loan.
We sold that house for the asking price (450,000), and when we paid off the realtors attorney, and the equity line of credit, we had made about $171,000 in profit. That and we had a brand new house with no mortgage to retire to.
Personally, IMO we made that equity line work for us, and with some due diligence and realistic thinking it sure did.
Is this a great country or what?
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I think some of what keeps people from doing things like that is the time element. They think that, gee, it takes so many YEARS to accomplish something like that, then they feel intimidated just thinking about it and don't do it. Those years pass by anyway, sometimes pretty fast, and then they regret not doing things.
