21 Jun I want to buy at the Shore but I’m ill. What are the options?

Q. I’ve always wanted to buy a home at the Shore and I know prices are crazy now. I have $500,000 that I can use as a down payment and I could get a mortgage for the rest. But I’ve just been diagnosed with something that gives me a life span of only five years. I’m not married and I have adult kids and I don’t want to be a burden on them if I need care near the end of my life, and I think it will. Is it selfish to buy a Shore place now or should I just hold onto the money for whatever care I need? I’m not worried about leaving them an inheritance because at least I do have $2 million in life insurance.
— Unsure

A. We’re sorry to hear of your diagnosis.

This is a challenging time for real estate buyers, and now with mortgage rates on the rise, borrowing for a home is much more expensive than it was even a week ago.

Owning a piece of property, whether at the Shore or in the Poconos or in your current neighborhood, comes with responsibilities, said David Principe, a certified financial planner with SAGEbroadview Wealth Management in Morristown.

“If the heat goes out, if there’s a problem with the roof, if there’s a leaky pipe… it’s all on the owner to fix,” he said. “Utilities and taxes fall to the owner to set up and to pay.”

He said you should also consider whether you would have anyone else to step in to help out if needed, but that can be tricky. Would they know all the details about your various accounts? Would they be able to work with the appropriate service providers or bill collectors?

“In effect, owning a piece of real estate is a sort of an anchor that isn’t easy to pull up — or walk away from — at a moment’s notice,” he said. “If you should require treatment, there could be a lot of loose ends to tie up right at a moment when you might need to be more able to walk away. In short: it could be that your energy and the energy of those supporting you might be directed at taking care of a house as opposed to taking care of you.”

On the other hand, if you were to undertake long-term rental, you wouldn’t have any of that extra overhead or responsibility, Principe said. You could come and go as you please, and someone else — the landlord — could be responsible for household maintenance and other items.

This idea would also give you more cash in reserve that could be available to pay for your case, should you need it.

“Depending on the house you find, you might be able to work out a long-term agreement with your landlord to get you better pricing,” he said. “I believe this approach would be simpler, and it would likely be my first recommendation.”

If you have your heart set on owning a specific property but remain worried about maintaining liquidity, you might consider a viatical settlement.

“This is an arrangement where a third-party buyer pays you an amount to purchase your life insurance policy,” he said. “This buyer takes over all future premium payments and in exchange becomes the beneficiary of the policy.”

In order to sell a policy in this type of arrangement, you must be diagnosed with a chronic or terminal health condition, and you will be required to disclose your medical records, Principe said.

If you consider this type of settlement, Principe said, you should meet with a qualified financial advisor to help you assess its pros and cons. But, he noted, you would still end up with homeownership responsibilities so he probably wouldn’t recommend this path.

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This story was originally published on June 21, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.