Downsizing your home no longer a retirement strategy

Jacking home mortgage rates from 2% to 7% will do that.

intercst

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Remember when people were complaining about the near zero interest rates we were receiving on savings and bonds but enjoying the thought that they had a lot of equity in their houses that they could use. Sounds like we have the flip side of that song.

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This summer a couple in my condo association were so happy and proud to be selling their condo and moving to Florida. Retirement plans long in the making they were gone in a flash. But to what? A higher-priced condo and a threat that there would be no homeowner’s insurance. Did they have the money of course they did. Will they leave any money to their kids? Probably not or very little. Getting very old with no money is not anyone’s idea of fun.

I understand that. But 30 year loans under 3% was always an absurd thing to do. We need this return to normalcy and sanity in terms of the cost of capital.

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I guess I tend to go against the tide. We are in the process of getting our home, with a 2% mortgage, on the market. We are moving into our vacation home where we expect to spend half the year and travel the other half. No mortgage on that property, with taxes that have been quite stable, unlike the one we are selling with a history of 25-40% tax increases PER YEAR. Values have skyrocketed with the uber low inventory, and the profits should be decent. Best of all, leaving behind a parasitic property, given the maintenance it requires, much of it delayed by the two sets of owners who sold in their 70’s and 80’s.

We enjoyed the 12 weeks of travel we did this summer, and are looking forward to the smaller constraints and greater freedom that our vacation home provides. At some point, we may find a place we love so much that we want to buy there, and since our profits from the sale will be invested, we should be able to afford what we want. Since half the house will be storage, with the two of us in a 1 bedroom upstairs apartment, the house will be too small for family gatherings. We will do those by renting a cool vacation home somewhere much more exciting than the suburb we live in, and inviting others to join. Did that this summer and it was great.

Someone is going to get a great house on a great lot, in great shape. And they will pay well for it.

IP

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