Q–I’m 50 years old and my wife and I live in a 3-year-old rambler. We like the house but not the location. We have no mortgage and wonder if we should move now or wait until I’m 55.
Our house is probably worth $240,000. We don’t want house payments. Would we get hurt on taxes if we bought a cheaper house?
A–Most people who sell a home buy a larger, more expensive one. They not only want a nicer, bigger home but also want to defer profit from the sale of their previous residence.
The tax problem arises when homeowners decide they want a smaller, less expensive house that is easier to maintain.
Regardless of the reason, if a home seller is over age 55, he may make a one-time election to defer from taxation up to $125,000 of gain from the sale of a main residence. Persons under age 55 who sell their home and buy a less-expensive replacement will be taxed on some part of the gain from the sale.
The taxed amount depends on the cost of the new residence. From a tax standpoint, empty nesters and early retirees are wise to wait until age 55 to sell their family home, defer $125,000 of gain and buy a retirement cottage.
Q–We want to buy our first house. My husband gets $723 a month for disability, and we have $17,000 saved up. How can we get funding for a house?
A–The amount of a mortgage loan is based on a family’s total monthly income from all sources, which might include child support, disability payments and employment. Mortgage lenders are trained to evaluate all criteria, then determine the maximum amount that can be borrowed.
The simplest way to prepare to buy a home is to visit a mortgage loan officer. Without cost, she or he will evaluate a buyer’s financial condition and figure the maximum loan amount–a process called prequalification.
Once you know approximately how much you can borrow, add to that the money available for down payment and go find a house to buy.
