Feeling at home is very important to most people. It becomes even more important in old age. It's worth finding out about real estate in good time, because ultimately having the correct finance in place is key to achieving your desired living situation.
Finding somewhere to live involves many challenging aspects: the wants and expectations of single people differ from those of young families, and the list of things older people want generally features different priorities again. The following question is key, however: "To rent or to buy?" In both cases, the budget plays a crucial role. Once issues of budget constraint are dealt with, tenants normally have no other financial worries on their minds than the security deposit. When thinking about buying a home, though, there are many questions to consider, such as:
- financing - own assets/borrowed capital
- which mortgage to choose
- how to pay it off
- setting aside money for possible renovations or refurbishments.
Financial planning for buying a home
Anyone who owns their home or plans to buy one has to consider questions of provident insurance (security in the event of death or incapacity to work), tax matters (achieving a balance between imputed rental value and debt interest) and issues relating to inheritance law and matrimonial property rules. When a pension analysis is carried out, these topics are carefully examined and incorporated into workable solutions.
Needs change over the years
As we get older, our priorities change; we become more focused on security (e.g. access to emergency services, provision of care), ease of management (e.g. everything on a single level) and special requirements (e.g. removal of obstructions). As far as finances are concerned, the following rule of thumb applies: Younger people need to devote no more than one-third of their income to their home - although a higher proportion is of course possible if you have built up bigger assets
Homeowners would be well advised to consider carefully the advisability of mortgage reduction or mortgage increase before they retire. Liquidity and sustainability may become a problem (from the bank's point of view) later on. This would certainly be a good point at which to think about succession planning and take appropriate steps (e.g. usufruct, residential rights) to ensure that you can continue to enjoy living in your own home without any worries.
Professional advice recommended
Make sure you plan your early retirement in time and seek professional advice. The experts in our Centre for Pension Planning deal with retirement-related questions on a daily basis and are happy to share their expertise and comprehensive advice with you. Get in touch with our Centre for Pension Planning. Our experts will be happy to help.