Renting vs. Buying in Retirement: Which Is Right for You?

If you're retired, should you buy or rent a home? Here are some things to consider before choosing.

The rent vs. buy debate has long been argued. But for those in retirement, the dilemma deepens.

Sure, homeownership offers stable, reliable payments (great for that fixed income) and the ability to customize your property as you choose, but renting offers perks too. From the lack of maintenance and repairs you’ll have to do to the easier qualification process and the lack of long-term commitment, rental properties can be a good choice as well.

So, how do you choose?

A great place to start is with your pocketbook. How much does it cost to own a house in your preferred area vs. renting one? How do those numbers fit into your overall financial picture? Let’s break it down in more depth.

The Costs of Owning a Home vs. Renting

Close up on a woman with a laptop and a calculator working through housing finances.

First off, start with your ideal retirement location and take a look at both home prices and average rents. Be sure you’re looking at comparable properties—homes that offer you the space, amenities, and level of comfort you’re looking for in retirement. 

You should also pull up a mortgage calculator to get a feel for what your monthly payment would be. Remember that a mortgage payment will also include your home insurance and property taxes. These are items that would be paid for by your landlord or property manager should you decide to rent. 

Finally, consider the other costs that come with each housing arrangement:

  • When renting, you might have security deposits, pet deposits or rents, condo fees, maintenance fees, and more.
  • As an owner, you’ll have to cover maintenance and repair of the home, the initial down payment and transaction fees associated with buying the property, and interest over the course of your loan.

You can also factor in any property tax exemptions you might be eligible for as well as the mortgage interest tax deduction, mortgage credit certificate, and other tax benefits that could offset the costs of homeownership.

Your end goal should be to determine the monthly cost of owning a home vs. renting one in your desired area. If there’s a stark difference, then you have your answer. If there’s not, then you have some more thinking to do.

More Than Just Money

A stack of coins in front of a wooden model house on a table.

Of course, renting and homeownership costs are only part of the equation. You also have to look at the bigger picture—the non-financial one. 

Here are some other considerations you might want to take into account:

How much will you actually be at the home?

Do you plan to travel a lot? Will you busy with lots of activities and hobbies? If so, maintaining your home may be difficult and renting may be the best scenario. If you expect to stay home and live a slower life, then owning could be the better choice. Just make sure you have the time necessary to care for your property before diving in.

How much liquidity do you need?

Owning a home ties up a lot of cash. Though you can certainly sell the property and access that cash later on, it’s not a simple or easy process. If you need lots of liquidity and quick access to your money, then buying probably isn’t the safest bet. If you can afford to invest your funds for an unforeseen amount of time, then buying is a viable option.

How much space and privacy do you need?

Renting means you’ll probably be in some sort of multi-family building or condo community, which inherently means less privacy and more neighbors. Want a more secluded lifestyle with just you and your partner? Then buying may be the better choice.

How important is stability?

If you’re on a super-limited income, renting could pose a risk. When you own a home, you have control over your costs (you can switch insurers, DIY your repairs, or even sell your house and move if you need to). With renting, you’re at the whims of your landlord. You could see a steep rent hike or even lose your home with very little notice.

What sort of legacy are you looking to leave behind?

There are two sides to this coin. On the one hand, renting means you won’t leave your heirs with any huge, outstanding debts (like a mortgage). On the other, it also means they won’t get a significant asset (like a piece of property) when you pass. Consider your overall retirement goals and see what fits into your plans best.

How much time do you need—and how much digging into your finances are you OK with?

Rental applications can be processed fairly quickly—usually within just a few days. But with a mortgage, you’ll probably be waiting at least a few months (not including the time your home search takes) before you can make your big move.

There’s also the qualifying process to consider. Landlords will usually look into your credit and run a background check, but that’s where it ends. When buying a home, your lender will need bank statements, tax returns, W2s, and more. Determine what you’re most comfortable with as well as what you have the time for.

Will you move again in the future?

Are you looking for your final living place, or is there a chance you might move again a year or two down the line? Moving as a renter is a much simpler and more affordable process. While you can definitely sell your home if necessary, the effort, time, and money it takes is more substantial as an owner. So if you plan to be more transient in your twilight years, a rental is probably the right bet.

Buying a Home in Retirement

If you’re considering buying a house in retirement, 55places can help. Contact us today to start your homebuying journey!

Can you spot the $207,744 difference between these identical homes?

Financing is the difference!

Get the details in The 62+ Loan™ Homebuyers Guide.

55places Mortgage is a joint venture between Mutual of Omaha Mortgage and 55places.com.
Details here.

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