We all have the dream of making that last mortgage payment and then screaming to the world that our home is now truly ours. It is natural for us to want to stay in our homes forever, for “free”! Bruce Nemovitz, Senior Real Estate Specialist and Certified Senior Advisor, has been a full time realtor in the greater Milwaukee area for over 30 years. He and his wife Jeanne have helped over 3,000 families transition to their new homes. We invited Bruce to talk about the true costs of staying in our homes as we age.
“I have heard it so many times: I know I should move, but I live in my home for free. Or, Why would I want to move and have a monthly payment in an apartment or senior community? For some, it is the wise and prudent decision to remain in their homes. But for others it may not be the right choice, as age, health and financial circumstances may demand other choices such as moving to an environment that better meets those needs.
With no mortgage payment it sure seems like living in our homes is the cheapest way to live. But one must take into account the true costs of remaining in a home. Let’s look at a few of them. A major cost is home maintenance. This includes repairing or replacing major systems such as basement structure, roof, plumbing, furnace and electric. Upgrades or repairs to these major systems can be quite substantial.
Second, property taxes must be paid. Included in property taxes may be current or future special assessments for street, alley, sidewalk, sewer or water improvements.
Next, homeowner’s insurance and personal property insurance must be assessed. These costs have steadily been on the rise. Claims can cause an immediate increase or rejection of your policy.
Other costs of housing are the service providers you currently use to maintain your home. Lawn services and snow removal are constant companions. Handymen and delivery services may also be needed. I hear from so many of my clients that these service providers are not always reliable or affordable.
One major overlooked cost to stay in our homes is the use (or disuse) of our nest egg…our equity! Over 40% say that their home equity is the largest asset they possess. Home equity for most of us is tax-free, state and federal! A single person is exempt up to $250,000 in gain on the sale of a home, and a married couple up to $500,000. You just have to have lived in the home 2 out of the last 5 years. With the current real estate market stagnant or declining slightly in value, your equity is remaining at or about a level value. Carefully investing even just part of your nest egg could build value. You cannot take advantage of your equity when it is tied up in your home.
In summary, look at all of the costs of maintaining your home, as well as how you are utilizing the equity you have worked so hard to build. Living in your home “for free” may not be as cheap as you thought. Check with your financial planner to obtain an analysis to determine the cost of staying in your home compared to moving to a senior community. You may be surprised at what your will learn.”
Bruce Nemovitz was named the 2010 Realtor of the Year, by the Greater Milwaukee Association of Realtors®