We know that most seniors like to stay home as they get older, but the cost of maintenance can be a burden on limited incomes.
Includes property taxes. Home prices have risen nearly 20% in the past year, and these increased values often lead to higher property tax bills.
While property taxes vary widely by location, the average U.S. property tax bill was 4.4% higher in 2020 than in 2019. This year is expected to be even worse, with property taxes expected to rise by about 6.5%.
Meanwhile, do not keep up with the entry of the elderly.
“[Older adults] “They’re certainly weak, and I think it’s not counterintuitive that they are,” says Jeffrey T. Sanzenbacher, a research fellow at the Center for Retirement Research at Boston College as well as an associate professor there.
From taxes to mortgages to maintenance costs that rise with age in a home, many seniors struggle to make ends meet when it comes to one of the pillars of a comfortable life: stable housing. Fortunately, there are resources that can help you if you or an older family member needs help.
How to get help with property taxes
Property taxes in particular can “eat your income,” Sanzenbacher says. These taxes are affected by the value of your home. With home values on the rise, this unfortunately means that property taxes for some homeowners are also going up.
This is a problem for retirees who mostly rely on Social Security. The program makes up 90% of the monthly income for one in four recipients, according to the Center on Budget and Policy Priorities.
Each year, the Social Security Administration looks at inflation in order to determine how much to increase Social Security checks for the following year. Prices are up more than 5% from last year, and Social Security checks are expected to increase about 6% for 2022, but that’s still close to the growth in home prices.
“So if you rely solely on Social Security, your income only grows with the average wage index, and your property taxes will rise at the rate of home values,” he says. “So, especially for people on low and middle incomes — home prices are rising faster than wages.”
Fortunately, almost all states offer some type of property tax credit program that seniors can take advantage of.
In some cases, they even allow you to defer your property tax until you die or sell your home. (The way this is usually organized is that deferred taxes plus accrued interest become a lien on your property, which can be settled when the ownership changes after your death.)
Other programs set taxes at a certain percentage of your income, or exempt the first $25,000 of your home’s value.
Property taxes — and the type of exemptions available — vary greatly depending on where you live. The Lincoln Land Policy Institute, a nonprofit corporation, maintains a database of various states’ property tax credit programs. It can be a boost that helps you maintain your home or a sigh of relief.
“There are a lot of eligible homeowners who don’t actually apply for and don’t benefit from the programs,” says Adam Langley, a researcher at the Lincoln Land Policy Institute who has written a number of reports on the property tax exemption.
That’s because these programs can be complicated to apply to in some cases, and because there isn’t enough conversation and awareness. This means that “a lot of people are leaving money on the table,” says Langley.
How to budget for home maintenance costs
Maintenance costs can also be prohibitive, especially with older homes.
In Cleveland, Cleveland Senior Housing Manager Mary McNamara says that most housing in Cleveland is about a century old, often with decades of deferred home repairs being too expensive for fixed-income elderly homeowners.
“A lot of people live in homes that need modifications so they can age in place,” says McNamara. “A 100-year-old house, if it has any maintenance deferred because of the fixed income that comes with retirement – roofs, electricity, porch, plumbing, all of these things need to be maintained regularly. But then, the question of how we also modify the house so that people can live in On one floor, whether it’s adding elevators or wheelchair ramps, making access to the bathrooms.”
Experts say you should expect to spend between 1% and 4% of your home’s value on maintenance each year. This means that if you own a home that’s now valued at $400,000, you’d need $4,000 to $16,000 each year to keep it in good shape. If any maintenance is put off, or if the house is getting older, expect that number to be on the higher end.
Older people in Cleveland want to age in their homes, and so the city helps them with programs that pay for home repairs to seniors on a limited basis, McNamara says.
The city is the poorest major city in the country, with 22.7% of seniors living in poverty, part of an upward trend there.
“I think there is a segment of the population for it [it] It is very possible in Cleveland to retire comfortably. I think there are also those residents, though, who really do live on Social Security alone,” says McNamara. “And that can be really challenging for them.”
Reverse home loans can help you leverage your equity
One positive consequence of rising home values is an increase in the homeowner’s home equity.
Reverse mortgages provide one way for homeowners age 62 or older to convert a portion of that equity into payments. Similar to a property tax deferment option, reverse mortgages are loans that rely on your home as security.
“A reverse mortgage is similar to a forward mortgage in that it involves a loan secured by the home,” says Jack Gutentag, a retired economist who now runs The Mortgage Professor and is a proponent of reverse mortgages in some cases.
“What makes it inverse is that the borrower, instead of getting a large amount of money up front and paying it back over time, receives the money in as many ways as possible and doesn’t have to repay it until he leaves the house or dies,” Gutentag explains.
It can be a tricky process, he notes, with a lack of transparency about lenders’ rates (which he attempts to remedy in part by offering up-to-date price comparisons on his website).
Estate heirs sometimes oppose the owners’ use of reverse mortgages, says Guettentag, because “when the borrower dies the loan must be repaid and repaid by selling the house and then whatever is left goes to the estate.”
Regardless, he says that you as a homeowner should make the decision that is in your best interest. This also applies to deciding how you want to receive your reverse mortgage payments, which can end up with about 60% of the equity in your home (although this varies depending on the type of loan and other factors).
“The best option is the one that best meets the needs of the particular homeowner,” Gutentag says. “A lot of people get cash reverse mortgages the first year, and then have nothing left later. This is a poor option, but one that cash-strapped people might choose. The safest option is to pay for 10 years where you get a down payment. Every month while you stay at home.”
Finally, there is the roommate option to cut expenses.
“I know it might not work for everyone, but I really think some seniors should consider living together (I think the golden girls),” says Robin Giles, a certified financial planner in Katy, Texas. “Older people are often widowed and do not have the ability to live on their own with half of their Social Security income and all housing costs as before. This arrangement helps financially, but it can also help with issues of loneliness, care, and support.” And it can be fun.
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