What should I know when I buy my first house?
For most people their 1st house is a substantial financial commitment. It may be the largest purchase they will ever make.
There are also drawbacks:
• A 20%+ down payment ties up a lot of liquidity that could otherwise be used in a health emergency.)
• A mortgage is often peoples’ largest liability. However, a typical 30-year mortgage locks in a low monthly payment, that you can also pay off early.
• Housing needs up-size with families and down-size with age. The “all in” costs of each move (commissions, staging, packing and moving, essential upgrades, title and mortgage fees, taxes, etc.) can easily range from 10% to 20% of the purchase price.
Commitments this large impact and are impacted by health and care. Most people want to grow and age in their own home. It is the environment that supports and surrounds their health and care, and people want control of that. A home ownership strategy should provide:
• Liquidity for health events,
• Eliminate the mortgage, to build equity for a HELOC (Home Equity Line of Credit), reverse mortgage, or possibly a deposit on a Continuing Care Retirement Community (CCRC) later in life.
• Minimize the number of moves and provide a safe and accessible place for care at each stage of life.
Each situation is different but making health and care contingencies part of your analysis can have significant benefits later:
• A large down payment can reduce the rate and adding a HELOC afterwards provides liquidity for health or other events.
• 30-year mortgages can be paid twice a month to eliminate it much faster. Building home equity over a lifetime makes a reverse mortgage feasible if you need an income or liquidity safety net for care later in life.
• Choosing where you live with health and caregiving in mind may save an unnecessary or unexpected move to enable care or rehabilitation.