A white picket fence surrounding a house with 2.4 children, a dog, a cat, a station wagon. This is the American dream.
But owning your own home might not be so dreamy as you approach retirement. In fact, since 1990 homeownership has been decreasing among 55- to 64-year-olds, a trend which experts suggest is likely to continue in the coming years.
Owning a home in retirement does have benefits, but make sure you weigh up the pros and cons before you make a decision. Here are a few reasons to consider on both sides of the argument.
Benefits of renting
Even if you have long since paid off your mortgage, your twilight years could still be plagued by the cost of home maintenance.
As your property gets older, what were once reasonable maintenance costs could balloon into an expensive burden.
Sometimes your home isn’t somewhere that you want to be. Maybe you want to move to a state with warmer weather, or have the flexibility to up sticks and move closer to family. Some retirees migrate with the birds, taking up an abode abroad in a different, warmer climate during winter months.
As a renter, you always have the option to leave as soon as your lease ends, unlike selling a home which could take months and involve many expenses.
Selling your house prior to retirement might be a good move if you are looking for a for a location independent lifestyle in your golden years.
Disadvantages of renting
Renters have less security than owners and can be forced to move on at their landlord’s request. Renters may also be vulnerable to rent hikes, which could be difficult to budget for on a fixed income. Also, if you get ill and end up in hospital, your rent will still need to be paid.
Depending on your location, the rental market might not be suitable for older tenants with mobility issues. Developments can be multi-story buildings with stairs, and there may not be bungalows available.
One of the benefits of owning a home is being able to deduct interest on your mortgage to save money on taxes. But you won’t benefit from this if you have already paid off the mortgage.
One other option is to use an equity release product to free up cash from your property to help fund your retirement.
The equity release market is quickly becoming a popular second source of income for retirees.
According to research by Responsible Equity Release, in January of this year older homeowners took three times more equity from property as they did two years ago.