Renting vs. Owning

It seams to come up often in discussions at our monthly Meetup Groups, Events, and conferences. This constant debate over if we should rent our own. Personally, I do question this as I’ll be downsizing my primary home in a few years for something smaller, and easier to maintain while I spend the coldest Winter months some place south of the snow belt. Do I own, or do I rent? This is the question.

Deciding whether to rent or own your home in retirement isn’t always about financial calculations, and if it makes sense from a money standpoint. This also has a lot to do about matching your lifestyle. It can too be based on your health considerations, and overall long-term plans. Both renting and owning have distinct advantages and disadvantages. By helping to understand these differences better we can guide ourselves toward a retirement that’s both comfortable as well as makes sense financially.

Renting: Freedom and Flexibility

Renting is often appealing to retirees primarily for its flexibility. Unlike owning a home, renting doesn’t tie you to a specific location long-term, which can be particularly beneficial in retirement. You could just get up and go! For example, If you’re looking to relocate to a warmer climate (like I may be doing in the winter months), move closer to family (you wanna hang with your grandkids!), or simply wish to try living in different places, renting allows you to do so without the commitment of buying or selling your property. This mobility can also be important if your health needs change. Let’s say you require a move that is closer to medical facilities or the support from family. Renting allows you to do so, more easily.

Another advantage is much lower upfront costs associated with renting. Typically, you’ll need only a security deposit and the first month’s rent, compared to that substantial down payment, closing costs, and property taxes involved in buying and homeownership. For some retirees who prefer liquidity, or should I say having stacks of cash readily available for travel, healthcare, or pickle ball memberships, renting can be financially beneficial!

Besides, maintenance-free living is another significant advantage of renting. As we age, managing home maintenance and repairs can become a crazy burden both physically and financially. By renting, this transfers most of these type of responsibilities to the landlord. This can help ensure predictable housing expenses as well as reducing stress related to those unexpected home repairs.

However, renting does have its drawbacks. One of the most significant is the absence of accumulation of equity. Monthly rent payments contribute solely to your landlord’s equity, not your own. This means missing out on potential property appreciation, leaving less to pass onto heirs or tap into in emergencies.

Additionally, there can be some uncertainty around rent increases and lease renewals that can disrupt budgeting. Renters may face rising monthly payments or unexpected lease terminations if a landlord decides to sell or repurpose the property, creating some instability during a life stage when stability is now highly valued.

Owning: Stability and Asset Building

Owning a home provides retirees with some tangible stability. Once you’ve purchased a property, especially with a fixed-rate mortgage, your monthly housing costs remain predictable. This stability allows for some better financial planning and can offer peace of mind. That can be particularly useful for retirees living on a fixed income.

Building equity is another compelling reason retirees choose ownership. Each mortgage payment increases your stake in your property. Over time, this equity can become a substantial financial resource, available through refinancing, home equity loans, or even downsizing later in retirement. Property ownership also offers some potential tax benefits, such as deductions for mortgage interest and property taxes, providing additional incentives.

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