Topic of the Day

Is Now the Time?

Refi your home mortgage or sell and downsize your property

by Jeff Winke

Grappling with life questions seems to occur no matter how young or how old we are. The questions seem to have shifted or evolved in the last half of life.

Items on our bucket list start to have greater urgency to either achieve or realize it ain’t gonna happen and should be jettisoned. Priorities have changed. Backpacking across Europe, climbing Everest, and pursuing a PhD in philosophy are all still achievable, but if you’re hovering around or actually have pulled the plug and retired other questions and pursuits take on greater importance... for instance, where to comfortably live.

Years ago, it was likely that you upsized your home to accommodate children, pets, or simply because you needed an extra room for a home office. But what once was the perfect home, may now be too hard to manage and maintain. The house may no longer meet your needs and capabilities. Bigger is no longer better.

Refinancing to extract equity or downsizing to a smaller house become options for opening the door to the next stage of life. So, when is the right time to refi or downsize? If owning your current home is giving you more stress and worry than joy and comfort, the time may be now.

“Usually, the best time to refinance is when you need equity from your home to renovate, remodel, or purchase another property,” stated Chad Lubben, senior loan officer, The Lubben Group, CrossCountry Mortgage, LLC, Cornelius, North Carolina. “Right now, when we’re towards the top of the market, is a great time to sell and downsize.”

If there is little left over after paying monthly bills, it is time for change.

Now more than ever before, older adults are maintaining an active lifestyle that includes hobbies, exercise, and continued learning – and these all cost a bit of money. It may mean joining a gym, taking painting classes, or taking a few adult learning college courses. If your monthly housing expenses are so high that you can’t enjoy your hobbies or activities, now may be the perfect time to refi or downsize to free up some cash so you can spend it the way you want.

Interestingly, one research study concluded that 64 is the best age to downsize, as people are still mentally agile enough to deal with the house sale and can process and benefit most from getting rid of unused space. One can easily argue one way or the other with naming a specific age in the times we live in. One also needs to wonder if The Beatles knew something with their song “When I’m Sixty-Four.” Certainly, downsizing to a smaller, more manageable home will make it easier to “mend a fuse when the lights have gone and knit a sweater by the fireside.” Who could ask for more?

“If you feel you have a lot of un-utilized space that you are still having to spend money and/or take time to maintain, it would be a good time to sell and downsize,” said Ruth Crain Shrader, senior mortgage banker, Atlantic Bay Mortgage Group, Charlotte, North Carolina. “It truly depends on the current market conditions and cost of maintenance. If you sell high, you are buying high as well so it may make financial sense, depending on your expectations in a property and what you are currently spending to maintain versus what you would be spending on the next home.

“Generally speaking, if you are getting a lower rate and/or cutting the existing mortgage term, it is a good time to refinance or if you are pulling cash out to consolidate higher interest rate debt (at the same or lower rate as your current mortgage), it can make sense. Also, depending on market conditions, if your mortgage is paid off but you have needs to pull cash out and current mortgage rates are lower than what you are earning on your investments, your financial advisor may recommend you don’t pull funds from investments and take out a mortgage instead.”

You may have outgrown your home in terms of your needs. If you’ve lived in your current home for some time, you probably opted for a neighborhood that suited your lifestyle at that time. Maybe you chose a suburban neighborhood or rural burb to escape city life. Or maybe you moved into a townhouse in the bustling city for an easier commute to work. These neighborhoods may have been ideal for your previous situation, but now they may no longer fit your needs.

You may find downsizing to a different neighborhood is what you need to fit your current lifestyle. Downsizing to a smaller home can reduce the amount of upkeep and free up your time for leisure activities, getting more rest, and spending time with family and friends.

“The big benefit of downsizing is that your taking your sale of your property at top dollar and rolling that money into a smaller and cheaper home,” Lubben said.

So... as life obligations seem to be winding down and you want to be in a place where it is easy to unwind, relax, and smell the roses that likely will require a refinance of your existing mortgage to tap into existing equity or selling to move into a more efficient home. Yes, the grass is greener on the other side.