It's an old question—should you buy a house for the advantages and equity it represents, or should you rent an apartment for the greater flexibility and mobility it can offer?
When it comes to retirement, the question becomes even more urgent. And a Washington Post article looks at the dilemma it presents to would-be retirees who might like to avoid the responsibilities home ownership entails—but worry about the potential instability renting might bring along with it.
It's one thing to downsize when you retire, but if you're contemplating just renting once you do—or if you've never owned a home to begin with—the question of renting vs. buying can be intimidating.
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After all, there are all those platitudes about investing in real estate ("they're not making any more land") and the conventional wisdom about the tax deduction provided by mortgage interest.
And then there are all the concerns about living in a place that technically is not your own, where you could be subject to rent increases with no recourse but to move—and maybe at a time of life when your health and mobility don't permit it.
But there are other considerations, as well. One thing the article recommends is that, whether buying or renting, you save as soon and as much as possible toward retirement. Then there's the issue of how affordable the rents are in the area in which you plan to retire; in many places, it's harder to find affordable rental property than it is to find a house to buy.
And equity in a home that you own can be used during retirement via a reverse mortgage, should the need present itself, to help you make ends meet. Renting can't offer you that.
A Kiplinger article points out that homeownership "can be more expensive than people imagine," and putting the money from a downsizing move into investments could be more advantageous for some people than sinking it back into a house, smaller though it might be.
Then there's the question of whether you will be physically and/or emotionally ready to make the jump from one to the other—or, if you've been a homeowner all your life, whether you'll be able to keep up with maintenance yourself or need to pay someone to do it for you and whether the expenses involved in keeping that home livable will cost you more than rent in the area in which you're retiring.
Fidelity Investments suggests questions to ask yourself before you make a decision:
How long will you stay there? (If you plan to move again in a short time, renting may be the better option, since it's easier to pick up stakes when you aren't dealing with an iffy real estate market, a realtor, and all those closing costs.)
Do housing prices always go up? As we've seen to our sorrow, that's not always the case, whether they're making any more or not.
Are you throwing money away on rent? Maybe, but what if you buy and the roof leaks or the foundation is cracked?
How much will you save on taxes? In some neighborhoods, that could amount to a sizeable chunk—if you rent.
And are you comparing equally? Rent vs. mortgage is only part of the equation.
In the end, you have to be comfortable with your decision, whether it's to buy and paint the living room a bright shocking red or to move to an apartment and just call the super if the kitchen faucet leaks.
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