Buying a home is a very significant milestone in life. It will likely be one of the biggest purchases you will ever make, so it is not a decision to make without some major considerations. Before you buy a home, you need to consider the future so that you will be financially comfortable late on in life. Here are some things to think about:
Don' t Take Money From Retirement Accounts
When you buy a home, most mortgages are going to require a down payment. If you are considering using money from your retirement accounts, you should reconsider. This is true even if you are decades away from retirement. First, you will be taxed on money drawn out before you are a certain age. Withdrawing money early will also decrease the amount of interest you will make on the account, thus lessening your future income.
Buying a House That is Too Large
While it can be tempting to purchase the largest house you can afford, it is not always going to be a great idea. You have to consider the costs that will be associated with such a large house. Placing a large amount of your money into your home can prevent your ability to save for your future. You will not only be paying a large mortgage, but you will also have to insure the home, pay the taxes, and pay to maintain the property. This will add up to a large portion of your monthly income, leaving little for you to save.
Paying Off the Mortgage
It can be a major milestone to pay off your mortgage early, and many financial advisors will often encourag it. However, it is not always the best thing to do in terms of saving for retirement. If you have absolutely no other debt, then it can be advantageous to pay off your mortgage early. However, if you only focus on paying off your mortgage while you have other debt, such as unsecured or medical debt, you can risk your financial future. Leaving too much debt on your credit report can lower your overall credit score. Focusing on your other debt will help you become better prepared for retirement.
If you are still ready to purchase a home after considering your retirement, it would be ideal to visit with a realtor or real estate attorney to ensure you are clear about what to expect when buying a house.
