When it comes to buying your dream home, nothing will turn it into a nightmare faster than waking up one day and realizing you can no longer afford the roof over your head. Here are some essential financial questions you may not have already considered:
7. How much can you afford to spend?
It goes without saying that price is one of the most important questions anyone has to decide on before buying any home. But it’s worth noting none the less.
For one thing, if you’re purchasing a home for retirement, but you don’t plan to make the move permanent for several more years, make sure to keep not only your current budget in mind, but also that which you’re likely to have during retirement.
Another scenario to consider, if you’re thinking of purchasing a vacation home and renting it out when you’re not using it to help make ends meet, make sure to account for times when the home will be vacant, and consider carefully the minimum number of weeks per year you will have to rent it out to meet your goals. Peak vacation seasons vary in length from one location to the next, and if the number of days you’ll need to rent out your home seems even the slightest bit unrealistic for the area you’ve chosen, chances are you could end up stretching yourself thin.
8. How much are you willing to pay for property and state taxes?
Even if you’re able to pay off your home in full before you move in, don’t forget to account for the numerous other expenses that come with owning a home, one of the biggest of which is taxes. If you’re tired of paying those sky-high property and state income taxes in places like Long Island and Connecticut, you’ll be pleasantly surprised by how much lower the tax rates are in the Southern. But not every place is the same. Florida has no state income tax whatsoever, but North Carolina’s personal income tax rate is from 6 to 8 percent (with Georgia, South Carolina and Virginia somewhere in between). On the other hand, no state income tax can mean heftier state sales or property taxes.
9. What other cost-of-living issues should you consider?
Beyond taxes, the cost of housing, food, utilities, transportation and medical care in a given area can affect whether you find the area affordable. Again, the Southeast is generally more affordable than the North or Midwest, but some places are more so than others. For example, while the cost of living in Savannah, Ga., is about 88 percent of the national average, in Hilton Head, S.C., it’s 138 percent. And keep in mind the reality that prices for utilities and staples historically tend to go up over time. While these increases may seem small from one year to the next, over the course of several decades they can easily become heavier financial burdens, especially if you’re living on a fixed retirement income.
Come back next week for our final segment in this four-part series, or read Part 1 and Part 2 if you missed them!
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