Your home in retirement. Is it a blessing or is it a curse? For a hundred years or more Americans have prided themselves in home ownership, but when it comes to retirement that home ownership could be a positive or it could be a negative. Today we’re going to address some of the issues that are faced by retirees when it comes to home ownership.

Number one, let’s just address the question, “Do I own, or do I not own?” If you own a home, the negative of owning a home is all the upkeep. You’ve probably lived in it for some time, maybe, maybe not. You probably have things that need to be upgraded. When there are repairs, when there are things that break down, you have to take care of them. You have insurance, you have taxes, and many times people get to retirement, and they still have a mortgage.

So, in addition to having the payment, you also have the costs of paying all those things that need to be done. Whereas if you rent in retirement, you only have that rent payment. When something goes wrong, something needs upgrading, or something breaks, you call somebody to come take care of things. So let’s talk about the numbers. I just did a rundown on a house in the area where I live right now. If you were to rent that house, it’s probably bigger than most retirees need – it’s about a 2,340 square foot house. But if you were to rent that house, the rent on is less than $5,000 a month, it’s right at $4,997. But with the interest rates being as high as they are right now to buy that very same house, you’re north of $9,000.

It’s $4,000 more to purchase the house than it is to rent the house. So a lot of people look at their retirement budget and they don’t have a house right now, and they say, well, you know, what are we condemned to renting? Because it’s not like it was a few years ago when the interest rates were maybe 1.75%, 1.95%, or 2.15. So many people are seeing themselves pretty much locked into a situation right now where it’s far cheaper for them to actually rent a house than it is for them to purchase a house.

But what are you giving up if you don’t purchase a house? Well, the old saying goes, I’m buying somebody else’s equity. I’m paying for somebody else’s equity. That value that you build by paying off the note of the house you don’t have because you don’t build any equity. You don’t build any value in a rental agreement.

You are simply living in a house. And that brings up an important point. If you do sell your house, which many people in retirement are thinking about doing, because you’re having to keep it up and the bills and the payments and oh, it’s just so frustrating – emotionally and psychologically, it becomes overwhelming. So if you sell your house, you’re still going to have a rent payment every single month, so it’s something you need to consider. Second thing I’m going to talk about is something a lot of people in Southern California are thinking about. Do we stay here where we’ve lived all our life and our family and our doctor and our church, synagogue, mosque, and everything else, or do we move somewhere else where there’s a lower cost of living, a lower income tax basis?

Do we stay or do we move? Now, why would you want to move? Number one, you’d want to move because you run the numbers and it looks like it’s cheaper somewhere else. Be careful on that. If you move somewhere else and they have roads and bridges and libraries and schools and a government, they’re going to get that money somewhere. For instance, I’ve got property in Texas. I inherited it from my father. A lot of people want to move to Texas because if you move to Texas, there’s no state income tax, which is true. No filing, no nothing, and California can be over 13%. I get it. I understand, but do you know that some of the properties that I’ve inherited in Texas that are around $300,000 in value cost more in taxes on an annual basis than my house here?

That’s well over a million dollars in value here in California, but the taxes on my house here are lower than the taxes on a $300,000 house in Texas. So be careful. You’ve got to do an analysis of everything when you start looking at dollar for dollar, is it cheaper to live here or live somewhere else?

The second reason people would want to move is they’re chasing their children. Or more importantly, I know because I have eight of those things, they’re chasing their grandchildren and they want to see their grandchildren grow up. They want to be a part of their grandchildren’s life, and occasionally they have to see the children themselves. But if you’re chasing your children, I’ve had instances where people, one lady lost her husband. One of her daughters moved to Minneapolis, Minnesota. She sold her house here and she moved to Minneapolis, Minnesota.

She bought a house with a mother-in-law’s cottage outback. That’s where she could stay separate from them in a different house. The family was all happy for two months. Two months after she moved up there by herself with her family, her daughter came to her one night and said, mom, we got something to tell you. My husband’s company is moving us to Dallas. So here she had sold her house here, bought a house there for the family to live in, her to live out in the backyard, in the mother-in-law’s cottage, and now her family living in the big house had to move to Dallas. So does she chase them again? She ended up doing that. Does she go where they are? Do you go where they are? Do you stay there and not know anybody? I mean, that’s your dilemma. And look at the financial impact of this move.

A lot of people sell from California where they’ve always been their whole life and they move somewhere. Well, your realtor loves you here because they get to make a realtor’s fee and you move somewhere else, and because you wanted to do an exchange and you didn’t want to pay the capital gains tax, you bought a house there as well, but you got there and you didn’t like it. About 50% of the people don’t. You move away from the weather, you move away from your church, synagogue, mosque, you move away from your doctor, you move away from your friends, your social network, all the people that you work with, you move away from all of that. You don’t like it there. You’ve sold a house here, paid a realtor fee, bought a house there, paid a realtor fee. You decide to sell the house there, another realtor fee, and to move back here, that’s four realtor fees, let alone the moving expense, let alone any of the other costs that are involved.

We did an analysis one time a few years ago. It was five or six years ago, we did the analysis of a couple that moved from here to there, moved from there, sold there, and moved back to here, and their cost was over $186,000. They bought very modest homes and severely downsized when they came back to California. So we did this cost analysis and we said, look, it’s $186,000. And they were like, oh, we wish we hadn’t done that. Then they got their tax bill because what they had also done in California is not only does realtor one, realtor two, realtor three, and realtor four love you, but the governor loves you because you’ve given up your Proposition 13 tax advantage. So you’ve got to be really careful and understand that chasing your grandkids, moving to an area has financial consequences.

One lady wanted to move to Scottsdale, Arizona because it was 79 degrees every day when she went over there in February. Okay? You’ve got to really check a place out and make sure that you’re going to like it there. Here’s what I recommend. When you move somewhere, if you move out of California, don’t buy the first year and don’t sell your house here. Then if you hate it, you don’t like it, you can always move back. Yeah, you might have to fix it back up from the people you lease it to for a year, but at least you have a place to come back to that’s already yours and you haven’t bought something there and you haven’t paid a realtor fee there, paid a realtor fee her. You get there for a year and you like it, fantastic. Then buy a house there and sell your house here.

That’s all possible. You don’t have to do it in such a godawful hurry and make a mistake that costs you $186,000 or more if you don’t love what you’ve done. Now, let’s talk about something that’s growing in our society and that is a reverse mortgage. Maybe you still have a mortgage payment of a little bit and you say, well, why don’t we get a reverse mortgage? Because I hear with a reverse mortgage, they will actually pay me every month a certain amount of money. That’s true. They will. They’ll pay you an income from your home. The more you have your house paid down, the more they will pay. You need to really be careful here though, because here’s what I always ask people, is there anyone in your family that once you’re gone, if it’s a single person, once you’re gone, if it’s a married couple, once you’re both gone, is there somebody that would want to live or need to live or have to live in your house?

Many times that answer is yes. I’ve had some people say, well, we’ve got a daughter. She’s special needs. She’s pretty much okay on her own, but she has to live with us. She could never live out on her own in her own apartment or something. Well, you’ve got an issue there because once you do the reverse mortgage, yeah, the money comes in is great. But what you’re doing is you’re spending down on the equity that you’ve built into the house and you spend down to a certain point, you pass away. You’ve got to leave the home to someone in your family and you got to be really careful because the mortgage company will come wanting to get their money out of it. That mortgage company that wants to do the reverse mortgage is planning on making money off your house when you sell it or your family sells it or they sell it once you’re gone and they get their money back at that time.

So many times, you give up a lot of your rights, your privileges, your options if you get a reverse mortgage. It’s not just the end all of greatness and that it’ll pay you income. I like to go through some questions: Does anybody need it? How much do you owe on it? They’ll only loan in a reverse mortgage up to, I’m told around 60% of the value of the home. If you’ve got a $1 million home, they’ll loan up to 600,000 on that reverse mortgage, and if you owe 500,000, you’ve only got $100,000 that you can get out of the reverse mortgage. So it’s not just all bells and whistles and ice cream, okay? You’ve got to make sure and check it out. And my recommendation is this, and I have some people that we recommend from time to time, they don’t give us any kickback or any kind of payment, but you need to go to someone who in a reverse mortgage situation is going to shop that around to different lenders because different lenders give different options with reverse mortgages.

Come June of 2025, I will have done what I do for 30 years. In 30 years of reverse mortgages starting and growing, I’ve recommended to two people that they look at securing a reverse mortgage because it fit their life. I’ve recommended that a lot of people to look at reverse mortgages because they want to investigate them, and generally they’ve all come back and have said, no, no, no, that’s not for me. There are too many things that tie the home to the mortgage company and not to my heirs. So you’ve got to make a choice when it comes to reverse mortgage, but be really careful.  That mortgage company is in it to make money. You’re in it to maybe pass your house along. That may not be an option.

Want more info? You can talk to a realtor or a mortgage person who does a reverse mortgage. Remember, they’ve got a vested interest in you saying, yes, I want to do a reverse mortgage. That realtor will help identify a mortgage company that will help you basically sell your equity back to a mortgage company. So they may have a conflict of interest because they’re making money if you do one. They don’t make money if you don’t. So be careful talking to a realtor. It’s like if I pull my car onto a car lot and I roll the window down, and if somebody does come out, (they don’t come out anymore and really talk to you the way they used to) But if they do come out and you roll your window down and say, this is my car. Do you think I should trade it?  What’s that car salesman going to tell you? Absolutely. We’ve got some great models that we can get you in today. You can drive off in my model and make a trade. Why do they do that? They don’t make any money unless you make a trade. If they say, oh, wow, you got a nice car, A lot of value there. It’s really clean, nice and shiny, and you’ve obviously kept it nice… Don’t trade that car. Well, then they’re not going to make any money! So be careful talking to a realtor. Number two, talk to your financial advisor. If you need income for your house, if you need to pay off the mortgage to lessen your monthly budget, there are a lot of reasons that you could stay in the house and you’re comfortable staying in the house. Not just the financial reasons, but the psychological reasons of being in your home, of being in a place that your kids were raised and you’re familiar with.

My mom developed Alzheimer’s, and that’s what led her to passing away back in 2008. In the last three years of her life, they moved down to Texas and mom would sit there with all her things. Her piano was right there, her chair was there, her couches were there. All the furnishings from her house were there, but all she would repeat over and over is, “Honey, take me home, honey, take me home.” Because even though her furniture and her people were there, that house they had lived in for 40 years before they moved into that last house, that house was really home. So be careful about leaving your home, selling your home, reverse mortgaging your home, work with your financial advisor to see if there’s a way to build a plan to lessen the burden on you, maybe to have somebody take care of the home so the maintenance is off your back, off your shoulders, and somebody else takes care of it.

If you don’t have a son or a daughter to do that, that leads me to the third person you need to talk to. If you want to do something, talk to a realtor, talk to your financial advisor. But number three, talk to your family. Maybe your family can help you with some of the things around the house, with the upkeep, with the care. Maybe they can help you financially get some of the care. Maybe they can help you financially because you’re going to leave it to somebody, and if you’re going to leave a mortgage to somebody, maybe they can take on that mortgage because knowing that that house will come to them after you’re gone, maybe they’d be willing to take on the mortgage and relieve you of that burden. I’ve seen it happen, but it doesn’t happen unless you have the conversation.

So who can you discuss this with? A realtor, your financial advisor, but for sure, your family before you make a decision on your home. Hey, I hope this was helpful. If you want to see more about how we help our clients, check out our website, www.mosleywealthmanagement.com. That’s M-O-S-L-E-Y wealth management.com. If you want more information about what we’ve talked about today, check out our other videos. I’ll see you next week!