Relocating in Retirement: How to Buy a Home Without Liquidating Your Investments

You have worked for years. Your kids are grown and out of the house, and you find yourself entering a new phase of life where different choices become possible. Retirement is approaching, and you may be considering a move.

For some people, that means downsizing to a home that requires less maintenance. Others consider relocating to a warmer climate or a place that better fits their lifestyle in retirement. Whatever the reason, many retirees begin to think seriously about changing where and how they live.

In many of these situations, retirees share a similar financial picture. Their home may be fully paid off, and they may have accumulated a meaningful amount of savings. However, much of that wealth is often invested in brokerage accounts or retirement accounts rather than held in cash.

This creates an important question. If you want to purchase a new home, do you need to sell your current home first and hope the timing works out? Or do you need to liquidate investments to fund the purchase before the existing home is sold?

In our experience working with clients, this situation comes up frequently. The most important thing to understand is that you often have several options that allow you to make the transition without creating unnecessary taxable events in your investment portfolio.

Option 1: A Home Equity Line of Credit (HELOC)

One option is to establish a Home Equity Line of Credit against the value of your current home. Most lenders will extend a line of credit up to roughly 80% of the home's value.

This means you may be able to access a portion of your home’s equity while continuing to live in the property. If the home you plan to purchase is less expensive than your current home, this approach can provide the funds for the purchase without immediately selling your current home.

In many cases, HELOCs have relatively low upfront costs. Some lenders charge little to no application fees, and the line of credit can remain open with a zero balance until it is needed. When no funds are drawn, there is typically no payment required. Once funds are used, the payment structure is often interest-only for the first ten years.

Limiting the loan to about 80% of the home’s value helps protect both the homeowner and the lender. When the property is eventually sold, there is still equity available after paying off the line of credit and covering transaction costs.

Option 2: A Securities-Based Line of Credit

Another possibility is a line of credit secured by a taxable brokerage account. This type of loan allows investors to borrow against their non-retirement investment assets without selling the underlying investments.

Because collateral is a liquid investment portfolio, lenders often provide flexible loan terms and relatively quick access to funds. Payments are typically interest-only while the balance is outstanding.

This option can provide useful short-term flexibility during a home transition. However, it is generally best viewed as a temporary solution rather than a long-term financing strategy.

Option 3: An Unsecured Loan Based on Retirement Assets

In some cases, lenders offer unsecured lines of credit based on the value of retirement accounts. One example is an Unsecured Flexline, where the loan amount is determined as a percentage of the balance in retirement assets.

Because retirement accounts cannot typically be pledged directly as collateral, these loans are structured differently than securities-based lines of credit. As a result, the loan amount is usually more limited and may not cover the full purchase price of a home.

These loans may offer interest-only payments for an initial period before converting to an amortized payment schedule over a term that may extend up to ten years.

The Goal: Short-Term Flexibility

The goal of these strategies is not to carry debt indefinitely. Instead, they provide short-term flexibility that allows retirees to use existing assets efficiently while coordinating the sale of their current home.

In many cases, the intention is to repay the loan once the original home is sold, often within several months. By using these tools carefully, retirees may be able to avoid unnecessary capital gains, income distributions, or disruptions to their investment strategy.

If you are considering a move in retirement and wondering how to coordinate the purchase of a new home with the sale of your current one, it may be helpful to review your options as part of your overall financial plan.