It’s a personal choice whether to buy or rent during your retirement years. Like other financial decisions, there is no one-size-fits-all solution. Some people want to travel extensively during their golden years, while others want to stay close to home to be with their loved ones.
Here’s a rundown of some essential things to think about before making your next step.
Consider These Factors Before Buying or Renting Your Next Home
The argument behind renting or purchasing a property will be heavily influenced by where you plan to spend the rest of your life. According to Investopedia, a Trulia research from 2016 showed that renting was less expensive in 98 of 100 towns with a substantial elderly population. This conclusion did not hold true in the South, where owning a property was less expensive than renting.
A decision to buy or rent is influenced by the lifestyle you see for the future. If you intend to travel the world, buying a home may be too much burden. Rentals usually provide a lot more flexibility, with minimal maintenance issues and the option to move on more quickly when the mood strikes.
Practical considerations like as whether you can aging in place in your current house are also important factors to consider. If you live in a house with all of the bedrooms upstairs, for example, you’re likely to have trouble navigating the stairs if you become hurt or have a disease that makes it difficult to do so.
As you get older, homes in rural places far away from medical treatment may become impractical. There is no denying that the closer you are to a hospital emergency department when a medical emergency arises, the better.
Cashing out your home equity may be the greatest option for baby boomers who have not saved enough money to live comfortably when they retire. Putting your home equity in a liquid, easily accessible account could provide you the peace of mind you need.
The Benefits of Owning
1. Having a home ensures security.
In comparison, owning a home provides a level of security that renting rarely does. Fixed-rate mortgages have a fixed interest rate throughout the life of the loan. Even adjustable mortgages, which have established limits regarding how often and by how much they can fluctuate, are more stable than rent. When market conditions change, rents can fluctuate dramatically and without warning.
When you consider that landlords may decide to sell your property out from under you, it’s simple to see why renting is regarded as an unstable living condition. Many elders are concerned about the possibility of being forced to relocate.
2. Homeowners have the ability to modify and alter their living spaces.
While some landlords may agree to let renters paint the walls to suit their unique tastes, it’s unlikely that you’ll be able to make it into your dream house. Because you don’t own a rental, you have little control over needed upgrades or simply maintenance difficulties, which can become inconvenient reality when the air conditioning or heat is interrupted.
3. Create equity.
The idea that you build equity in a home is probably the most basic reason homeownership has always been a big part of the American Dream. This type of wealth is highly valued and is likely to be the most persuasive argument against renting in many cases.
The Benefits of Renting
1. Renting is less expensive in many American cities.
According to Kiplinger, as of January 2021, renting is less expensive than buying in 34 of the country’s 50 largest cities. This report specifically cited $1,988 as the median-priced mortgage payment for a home versus $1,727 as the median rent paid.
2. Allows capital to be liquidated in order to make other investments.
Renting can free up capital, allowing you to earn a higher ROI than is possible with real estate. While real estate can be an excellent investment in certain markets and years, it can underperform in others. When the housing market crashes, your money is literally stuck and cannot be accessed as easily.
Liquid assets enable you to tailor investments to reflect the opportunities available in any given market. While homeownership can be a great investment, it does tie up your money and makes it more difficult to access.
3. Home repairs are paid for by the landlord.
Dealing with unexpected home repairs is one of the most difficult financial aspects of living on a fixed income as a retiree. In most cases, as a renter, you do not have to worry about this. When the roof leaks or the air conditioner breaks down, the landlord is responsible for the repairs.
To be sure, there could be some exceptions to this general rule. That is why it is critical to carefully read your lease before signing on the dotted line.
4. Allows for greater mobility and flexibility when traveling and moving.
Retirees who want to travel the world and spend a significant portion of their time on the road are likely to value the freedom provided by a rental agreement. Responsible homeownership necessitates a certain amount of ongoing attention to maintenance details, which no one wants to deal with while on vacation.
5. Retirees may have a more difficult time qualifying for a mortgage.
When a person’s income stops, it can be much more difficult to qualify for a good mortgage. In comparison, qualifying for a rental agreement is much simpler.
You will almost certainly face the decision of whether to buy or rent your next home after you retire. This type of critical decision becomes even more critical for boomers as they carefully plan for the life they want. It is critical to evaluate all of the factors.