What to Know When Buying a House After 50

As people retire and take their benefits later, buying a home later in life is also becoming more common. Before making the investment, there are some considerations that baby boomers in particular should take into account, especially considering the recent news that mortgage rates are on the rise again.

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Mortgage rates are going up after a dip last summer. The 30-year fixed-rate mortgage averaged 5.51% in mid-July — last year at this time it was at 2.88%. Regardless how big a mortgage you qualify for, a good rule of thumb is to make sure that your monthly payment is no more than 25% of your monthly budget. You don't want to be in a position where you're "house poor" — meaning you own a home but don't have much extra money to spend because most of your income is going toward your mortgage — especially in retirement.

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Related: Should You or Shouldn't You Refinance Your Home?

Marc Hernandez, a global real estate adviser with Douglas Elliman of Beverly Hills, said he's seeing clients in their 30s and 40s looking for larger properties, while buyers in their 50s and 60s are looking to "reduce their real estate footprint."

"At this stage of life, the size of the family and the size of the home are incongruent," Hernandez says. "Generally speaking, the kids are out of the house, income potential has already peaked, and larger living spaces are no longer required." There are plenty of potential pitfalls to downsizing, however. Consider carefully how much square footage you're comfortable giving up.

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As millennials become the most populous generation, baby boomers (born 1946 to 1964) are at the age where their lifestyles and living arrangements are starting to shift. "Think of it: By 2030, all baby boomers will be older than 65," Hernandez says. "As the generation approaches that period, we are seeing a shift in the types of properties it desires. ... It's kind of like being on the right side of the proverbial bell curve: The types of properties that buyers wanted in the beginning of this cycle are not that different from what you're seeing on the tail end of it." This includes alternative living arrangements such as moving back in with family, moving to a college campus, or even having roommates.

Another factor for older home buyers is the ratio of interior space to exterior space. "The younger buyers are fine with the large home on a smaller lot," Hernandez says. "However, some of the older buyers are looking to reduce the living space, such as moving into a townhome that provides them with a bit of garden space so they can be outdoors, garden, and enjoy the sunshine."

Although some people enjoy gardening and other outdoor activities in retirement, others are likely fed up with landscaping and other chores of homeownership. They may welcome the transition to a place with "less yard space, less maintenance, and more amenities that are taken care of for them," Hernandez says. "Condominiums and townhomes fit that bill pretty well."

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Having restaurants, retail, and other everyday destinations nearby is a major factor in choosing a home. "Walkability is important to this age group," Hernandez says. "With more time on their hands as they approach retirement, having the ability to stroll to shops, restaurants, and entertainment is a luxury." There may also come a time when it's not safe to get behind the wheel of a car, and you don't want to have to rely on someone else to drive you for every errand.

Related: Cities Where You Can Live Car-Free

For homebuyers anticipating mobility issues as they get older, one of the most important criteria is a one-story home. "Older buyers are looking for properties where the living space and amenities are on one level," Hernandez says. "People are taking steps to avoid ... steps." This is a big consideration if you hope to stay in your own home as you age. 

Many seniors rely on passive income, such as rental income or earnings from business activities in which they're not actively involved. "When applying for a loan, many lenders require a larger down payment if funds are coming from passive income," says Bibbi Herrmann-Conner, a luxury real estate professional with the Harwood Group in Rancho Santa Fe, California. "So you might need to put down 35% rather than the traditional 20%." 

Related: Passive Income Ideas to Increase Your Retirement Savings

If you're older and buying a home to use as an income property, to leave to your children, or even to use as a vacation home and rent out part-time, it's important to think of the location. "It doesn't have to be swanky, but rather a place where people will want to come in for the summer and can bring their children and pets," Herrmann-Conner says.

Stagnant wages combined with high housing costs and student debt are forcing some millennials to move back in with mom and dad. According to a Zillow report, more than 14 million millennials lived with their parents even before the pandemic. Many have moved out and "boomeranged" back amid financial or personal stress, or after having children of their own. Because of this, baby boomers may find themselves needing to buy a home — or stay in their current one — to accommodate the new household dynamic.

Related: Moving in With Your Adult Kids? Here's How to Make It Work

Where should you move in retirement? A lot depends on what you're looking for. Retirees who want to lower their tax burden may want to consider Florida, Mississippi, South Dakota, Wyoming, or Alaska. All across America, there are affordable places to retire that you might be overlooking. In Arkansas, for example, the cost of living is 8% below the national average, and the city of Hot Springs attracts retirees with 46 hot springs, 11 championship golf courses, and an average home price under $285,000.

According to a WalletHub ranking, the top five locations for senior health care are Hawaii, Minnesota, Vermont, Alaska, and Colorado. This becomes an even bigger consideration at the local level. How far away would you be from a hospital or urgent care facility?

Real estate can be a great investment no matter what your age, Hernandez says. "It's an asset class that traditionally beats the stock market and provides tax benefits as well. I think more important than the age of acquisition is the location, condition, and price of the property."

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