Downsizing in Retirement: Why You Should Buy, Not Rent
Written by
Ashley Donohoe
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When considering options for cutting costs during retirement, downsizing your home can be a good place to start. You might find renting attractive if you like the idea of lower maintenance costs and the ability to relocate easily. But as long as you’re financially prepared and able to handle the upkeep, buying a place could be the ideal choice. Here are five reasons to consider homeownership over renting during retirement.
1. More Predictable Monthly Payments
Although buying a place usually costs you more upfront, your monthly mortgage payments should be much more predictable than rent, which landlords can hike significantly. Mortgage payments go up only with homeowners insurance and property tax increases. Because they are typically minimal amounts, this benefits a tight retirement budget. You’ll need to avoid an adjustable-rate mortgage which can lead to bigger payment jumps.
2. Sense of Stability
Buying a home gives you some stability that you might appreciate in your older years. It eliminates the stress of potentially needing to move out of a rental property due to rising costs, property sales and other issues. Settling down can also make it easier to build lasting social connections and get support as you age.
3. Freedom and Privacy
Whether you need more accessibility or just prefer a certain style, such changes are easier when you’re the property’s owner. You’ll have the freedom to make your place suit you and incorporate changes that could even make it more valuable. Plus, there’s the perk of privacy when there aren’t any shared walls or a landlord checking on things.
4. Potential Tax Perks
Owning a property during retirement can save you money when you file your taxes as well. If you itemize, you could get deductions for your property taxes, mortgage interest, mortgage insurance premiums and even some home improvements. You’ll just want to consider your potential deductible expenses since the standard deduction may be much more generous.
5. Ability To Build Equity
While there aren’t guarantees your specific property will appreciate, average home sales prices have increased significantly over the last few decades. Along with paying down any mortgage, experiencing potential property value increases will help you build equity that you couldn’t have as a renter. The equity will benefit you if you need to apply for home equity financing or sell your property someday.
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