Should Retirees Rent or Own? 3 Questions to Help You Decide

By: Terri Williams

For many of us, the decision to rent or buy is dictated by our income. If the monthly costs of homeownership take up no more than 30% of your income and you can afford a down payment, then buying a home is likely to make more financial sense.

But for retirees, who are typically on a fixed income, deciding between renting and buying isn’t such a simple calculation.

Retirees may choose to relocate for a variety of reasons, including downsizing, being closer to family, or to enjoy a warmer climate.

But no matter what your motivation for moving, you may be wondering if renting or buying a home is the smart choice. If you find yourself in a similar dilemma, ask yourself the following questions.

1. Is your income stable?

When you’re on a fixed income, it greatly helps to have fixed housing costs. That’s why taking out a mortgage might make sense for retirees.

“Having to worry about rising rent costs when you’re on a fixed budget can be stressful; owning your home means you have one flat payment every month that is also building equity for the future,” says Lori Beardslee, senior branch manager and construction specialist at Silverton Mortgage in Canton, GA.

However, in some markets, renting may be a good financial decision. According to Daniel R. Hill, CFP, AIF and president of D.R. Hill Wealth Strategies in Richmond, VA, the overall cost of renting is typically cheaper than buying—when you leave equity out of the equation.

“It’s also much cheaper to move from one rental property to another than it is to sell a house,” he says. That’s because you don’t have to worry about closing costs, homeowners insurance, a large down payment, and so on.

2. Can you afford routine upkeep?

One major concern for retirees to consider is the upkeep and maintenance that inevitably comes with owning a home. Cutting the grass, painting, and other home maintenance tasks are a hassle for anyone, but they can be downright dangerous for retirees.

Of course, these projects can be outsourced, but that costs money. And major home repairs—like a new roof, plumbing, or HVAC—can run to several thousands of dollars.

One advantage of renting is that the landlord will handle a majority of the home maintenance—some will even change the ceiling lightbulbs for you.

However, there’s another option to consider.

“Owning a condo or living in an HOA-maintained property can make homeownership much easier and maintenance-free for seniors,” says Beardslee. That’s why many seniors see condo living as a happy medium.

3. Will you qualify for a mortgage?

If you decide to downsize your home or move to another location, getting approved for a new mortgage may not be as easy as you think.

“If you have not financed a property after 2008, you may not know that the rules have changed since the Dodd-Frank regulations,” says Kevin Leibowitz, founder and mortgage broker at Grayton Mortgage in Brooklyn, NY.

Before 2008, he says you only needed a large down payment and a good credit history to obtain financing.

“Today, one of the most important factors is income, so the money you might be receiving from Social Security or your pension might not be sufficient to qualify you for the mortgage on the property you want to acquire,” Leibowitz explains.

However, Beardslee believes that it might actually be easier for older Americans to get a mortgage.

“A recent survey by the National Association of Realtors® shows that older Americans are the most worried about qualifying for a mortgage, yet have a better shot at being approved over younger generations.”

She says that credit scores and debt levels tend to improve with age, and baby boomers and the Silent Generation tend to have a more desirable debt-to-income ratio. They’re also more likely to have a larger down payment from the equity in a previous home.

“This plays a huge role in the mortgage process and gives older individuals a leg up on their loan applications,” she says.

If you do plan on buying and relocating during retirement, it might be in your best interest to rent in your new neighborhood first.

“You want to learn the area, and determine if it is truly where you want to be long term,” says Jonathan Bednar II, CFP at Paradigm Wealth Partners in Knoxville, TN. “Renting will allow you to pick up and move if your living situation is not the right fit.”


How to Pay Off Your Mortgage Before You Retire

pay off mortgage before retiring

By: Michele Lerner for

For most of your life, preparing for retirement means investing. But as the actual date approaches, you also will need to streamline your budget so your expenses will be as low as possible. If a mortgage payment is your biggest monthly expense, as it is for most people, you might want to try to pay off your mortgage before you retire.

Loan balances for those borrowers also rose, with the median amount rising to $79,000 from $43,400 during those years after adjusting for inflation.

While not everyone can manage it, many older homeowners prefer to pay off their mortgage balance entirely before they retire.

Keep in mind that some expenses of homeownership won’t disappear: you still need to pay for homeowners insurance and property taxes—and if you live in a condo or a home within a homeowners association, you’ll need to keep paying your association dues.

However, eliminating the bulk of your payment, the mortgage principal and interest, can go a long way to smoother cash flow once you stop work.

Ways to Pay Off Your Mortgage

The best way to pay down your home loan depends on your loan terms, balance and budget. In particular, you need to consider your monthly budget and whether you can afford to make larger payments to reduce your mortgage balance.

It’s particularly important to think about how long you plan to keep your home and how far you are into your mortgage.


If you’ve been paying off a 30-year fixed-rate loan for 15 or 20 years, you should think carefully about the advantages and disadvantages of refinancing.

In some cases, it’s a smart move to refinance into a shorter term loan of 10 years or even less, but be aware of the transaction fees and closing costs associated with a refinance—typically 2% to 3% of the loan amount. You may be better off applying those closing costs to extra payments on your current loan, especially if you’re near the payoff date.

Early in any home loan repayment you’re mostly paying interest, but by the last few years of your loan, you’re paying mostly principal. If you have refinanced before or bought your home within the last few years, refinancing into a shorter loan term could cause a big jump in your payments.

If you do opt to refinance into a shorter loan, be sure you can comfortably afford the higher payments and that you’ll recoup your costs quickly.

Prepay your loan

Refinancing locks you into a new payment plan, but if you’d rather have some flexibility, you can make extra payments to eliminate your mortgage faster.

You may want to add money to every payment, make an extra payment each year or even make a lump sum payment if you receive a tax refund or bonus.

Not only will you pay off your loan faster, but you’ll save thousands in interest payments.

For example, if you took out a $200,000 loan in 1999 at 4.5%, your principal and interest payments are about $836 per month—and your loan payoff date is 2029.

If you add $250 per month to your payment, you can eliminate your loan in 2025 and save about $13,630 in interest. If you can manage $500 more per month, you can save $21,300 in interest and be mortgage-free in 2023.

Put Mortgage Payoff Decisions in Context

It’s important to consider any decision about your home loan in the context of your other financial goals and commitments. Be sure you are contributing as much as you should to your retirement funds and eliminate non tax-deductible debt before you begin to pay down your mortgage.

Consult a lender and a financial planner to discuss your options on an individual basis.

This story was originally posted on SeniorHousingNet.