Credible
Get Rates
  • Refinance Student Loans
    • Compare Options
      • Best Refinancing Companies
      • Lender Reviews
      • Refinance Student Loans
      • Student Loan Consolidation
    • Learn the Basics
      • Fixed vs. Variable Rates
      • Forgiveness Programs
      • Consolidation vs Refinancing
      • Repayment Plans
      • More on Student Refi
    • How to
      • Consolidate Your Student Loans
      • Pay Off Your Student Loans
      • Lower Your Interest Rate
    • Tools
      • Current Student Loan Refi Rates
      • Refinancing Calculator
      • Repayment Calculator
      • Student Loan Score Calculator
  • Student Loans
    • Compare Options
      • Private Student Loans
      • Parent Student Loans
      • Law School Loans
      • Medical School Loans
      • Graduate Student Loans
    • Learn the Basics
      • Student Loan Limits
      • Living Expenses
      • Applying for FAFSA
      • Federal Student Loans
      • Student Loan Interest Rates
      • More on Student Loans
    • How To
      • Pay for College
      • Take Out Student Loans
      • Apply Without Cosigner
      • Apply for Student Loans
      • Pay for Grad School
    • Tools
      • Best Private Student Loans
      • Current Student Loan Rates
      • Student Loan Interest Calculator: Estimate Payments
      • Lender Reviews
  • Personal Loans
    • Compare Options
      • Best Personal Loan Lenders
      • Lender Reviews
      • Get Personal Loan Rates
    • Learn the Basics
      • How to Qualify
      • How to Get a Loan
      • Where to Get a Loan
      • Personal Loans with Cosigner
      • Pay Off Credit Card Debt
      • More on Personal Loans
    • Best for
      • Credit Card Consolidation
      • Debt Consolidation Loans
      • Home Improvement Loans
      • Good Credit
      • Fair Credit
      • Bad Credit
    • Tools
      • Current Personal Loan Rates
      • Personal Loan Calculator
  • Mortgages
    • Compare Options
      • Mortgage Refinance
      • Home Loan
      • Best Mortgage Refinance Companies
      • Best Mortgage Lenders
      • Mortgage Preapproval
      • Mortgage Payment Calculator
    • Compare Rates
      • Mortgage Refinance Rates
      • 30-Year Fixed Refinance Rates
      • 15-Year Fixed Refinance Rates
      • Home Loan Rates
      • 15-Year Fixed Mortgage Rates
      • 30-Year Fixed Mortgage Rates
    • Learn the Basics
      • How to Buy a House
      • How to Refinance Your Mortgage
      • How to Get the Best Rate
      • Cash-Out Refinancing
      • More on Home Loans and Refi
    • Pay Off Mortgage
      • Home Equity to Pay Off Debt
      • Paying Off Mortgage Early
      • Mortgage Refinance Cost
  • Insurance
    • Insurance Products
      • Insurance Products
      • Learn more about home insurance
    • Compare Options
      • Compare Insurance Quotes
      • Home Insurance Guide
    • Learn the Basics
      • What Home Insurance Covers
      • How Much Home Insurance You Need
      • Estimate Your Home Replacement Cost
      • How to Change Home Insurance
  • Company
    • About
    • Reviews
    • Blog
    • Lenders
    • Editorial Guidelines
    • FAQs
    • Press
  • Find My Rate
Advertiser Disclosure

Should You Rent or Buy in Retirement? Making the Right Choice

Renting in retirement gives you more flexibility and comes with fewer costs, but you won’t build equity or reap any tax benefits.

Miranda Marquit Miranda Marquit Edited by Chris Jennings Updated June 28, 2021

rent or buy in retirement #014452

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. By refinancing your mortgage, total finance charges may be higher over the life of the loan.
Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."

A successful retirement requires thought and planning. This is especially true when it comes to housing costs, which can eat up a big chunk of your expenses. As such, you’ll need to determine whether it makes more sense to buy or rent in retirement.

Here are some factors you should consider, along with some of the advantages and drawbacks of renting vs. buying in retirement:

  • Factors to consider
  • Pros and cons of renting in retirement
  • Pros and cons of buying in retirement
  • How to decide between renting vs. buying in retirement

Factors to consider

Whether you decide to rent or buy, some retirees like the idea of downsizing. When you downsize, you usually see lower expenses — your mortgage payment, utility bill, and maintenance costs may all go down.

Additionally, it can be a way to simplify your lifestyle, allowing you to get rid of some of the items you don’t use any more.

If you’re interested in downsizing in retirement — perhaps you want to buy a condo or rent out a smaller home for the time being — there are some important factors to consider.

Your timeframe for retiring

If you’re planning to retire soon and are happy with your current location, purchasing a home or condo could be a good option.

But buying, even if it’s a smaller place, comes with upfront costs and less flexibility should you want to move again. If you do buy, plan to stay in your home for the long run — at least five to seven years or longer — to recoup those purchasing costs. Otherwise, it might make more sense to rent.

Your current home equity

If you already own a home and plan to downsize, how much equity you have can make a big difference. You might be able to put down a larger down payment — or even pay for the new place outright — with the equity from your current home.

On the other hand, if you don’t have a lot of home equity, you might benefit more by renting out an apartment and investing your equity instead. Consult with a financial advisor if you’re unsure of the best route to take.

Your goals for retirement

The goals you have for retirement can also impact whether you rent or buy. If you want to live near your family, and they live in a place where it’s expensive to purchase property, renting becomes the obvious choice.

However, if you want to be able to make changes to your home and amass equity — and you don’t plan to move anytime soon, if ever again — buying might be the better option.

Your liquidity needs

Once you buy, your home locks up a good chunk of your net worth. While you might have stability in terms of a place to live, tapping into your equity if you need the money later can be difficult — and you might have to pay closing costs should you take out a home equity loan or do a cash-out refinance.

Keeping your money liquid in an investment account while you rent might be a more savvy financial move and can help you cover unexpected expenses. But if you want to leave an inheritance, building that equity over time can also provide your heirs with a valuable asset.

Pros and cons of renting in retirement

By renting in retirement, you can benefit from a lack of maintenance costs, high mobility, and greater liquidity in your assets. But there are important drawbacks to consider as well.

ProsCons
No maintenance or repair costsRising rent costs
High mobilityLandlord could sell and force you to move
Greater liquidity in assetsNo flexibility to change living space

Pros

  • No maintenance or repair costs: When you rent, you don’t have to pay maintenance costs, since you aren’t responsible for the upkeep of the property. Same goes for repair costs. If something breaks or gets damaged, your landlord takes care of it.
  • High mobility: If you decide to move to a different area, you don’t have to worry about the housing market or the time it takes to sell your house. You can move when you’re ready.
  • Greater liquidity in your assets: Your home can lock up a portion of your net worth when you buy. If you need extra cash, you’ll have to jump through hoops to access the equity in your home. When you rent, you can keep all that money in more liquid accounts.

Cons

  • Rising rent costs: When you rent, your monthly payment could rise each year. Your landlord has the right to increase rent in accordance with market conditions.
  • You could be forced to move: If your landlord decides to sell the property, you might have to move. Other reasons your lease might not be renewed include your landlord wanting a different tenant or you violating some terms of the lease.
  • Less flexibility with your living space: There are restrictions on what you can do with a rental property in terms of modifying the space. You can’t customize your living area by knocking down walls, painting rooms, or building additions. In some cases, you might not even be able to replace appliances without permission from your landlord.

Pros and cons of buying in retirement

With homeownership, you get to enjoy certain tax benefits, as well as the possibility of building equity and the relative stability of housing costs. On the other hand, though, you have less liquidity and are more tied down to your location.

ProsCons
Potential tax benefitsLess liquidity
Build equityTimeframe for selling
Stability in housing costsPotential losses due to market conditions

Pros

  • Potential tax benefits: If you itemize your tax deductions, you can usually claim a deduction for mortgage interest and points. You might also be able to claim a property tax deduction.
  • Stability in housing costs: With a fixed-rate mortgage, you don’t have to worry about rising mortgage costs; your monthly payment will be the same throughout the life of the loan. This provides a little more stability in your housing costs, even though your taxes might go up and you may have to pay for an unexpected repair or two.
  • Build equity: When you own a home, you have the potential to build equity over time. You can access that equity later (through a reverse mortgage, for instance) or let it keep building in value so that you can leave it for your heirs.

Another way to utilize your home equity is through a cash-out refinance. Credible can help you get started with your cash-out refinance. In just a few minutes, you can compare our partner lenders and see prequalified rates on a variety of different home loans.

Get the cash you need and the rate you deserve

  • Compare lenders
  • Get cash out to pay off high-interest debt
  • Prequalify in just 3 minutes

Find My Loan
No annoying calls or emails from lenders!

Trustpilot

Cons

  • Less liquidity: While you might be able to tap your equity later, it can be sometimes difficult to access that value. You might have to wait days, weeks, or even months to receive funds, which can be a problem if you need money fast.
  • It can take longer to sell: You won’t have the same kind of flexibility as a renter. Selling your home can take time. If you want (or need) to move quickly, that might not be possible.
  • Potential real estate market losses: If you’re forced to sell when the market is down, you could wind up with a major financial loss.

How to decide between renting vs. buying in retirement

Deciding whether to rent or buy in retirement can be a tough choice. Consider your retirement dreams and financial situation — and keep the following in mind — before making a final decision:

When to buy:

  • You want more stability in your housing costs
  • You hope to build equity to tap later or pass on to heirs
  • You know you’ll be in the same place for a significant period of time
  • You know you can afford property tax and insurance costs

When to rent:

  • You want to avoid the cost and responsibility of maintenance and repairs
  • You want more liquidity
  • You’re not concerned about passing a house down to your heirs
  • You want flexibility in being able to move, or you aren’t planning on staying in the same place for very long
About the author
Miranda Marquit
Miranda Marquit

Miranda Marquit is a mortgage, investing, and business authority. Her work has appeared on NPR, Marketwatch, FOX Business, The Hill, U.S. News & World Report, Forbes, and more.

Read More

Home » All » Mortgages » Should You Rent or Buy in Retirement? Making the Right Choice

Mortgage and Home Loan Basics


  • How to Buy a House
  • When to Buy a Home
  • Home Buying Costs
  • Best Mortgage Lenders

Home Loan Guides

  • How to Find the Best Lender
  • Down Payments: Ultimate Guide
  • Mortgage Closing Costs
  • Timeline: Home Buying Process
  • List: Mortgage Loan Types

Tools and Resources

  • Get a Home Loan
  • Get Preapproved for a Mortgage
  • Today’s Mortgage Rates
  • Lender Reviews

  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to share on Twitter (Opens in new window)

Related Articles

Personal Loans

Should You Buy or Lease a Car? Pros and Cons of Each

Mortgage Refinance

The Pros and Cons of Cash-Out Refinancing

Home Insurance

How to Buy Homeowners Insurance

  • Read More
    • Refi Student Loans
    • In School Loans
    • Personal Loans
    • Mortgages
    • Insurance
  • Resources
    • Lender Reviews
    • Loan Calculators
    • Student Loan Score Calculator
    • Data Insights
    • Debt Statistics
    • Sitemap
  • Compare
    • Student Loan Refinance
      • Current Student Loan Refi Rates
    • Student Loan Consolidation
    • Private Student Loans
      • Current Student Loan Rates
    • Personal Loans
      • Current Personal Loan Rates
    • Refinance Mortgage
      • Mortgage Refinance Rates
        • 15-Year Fixed Refinance Rates
        • 30-Year Fixed Refinance Rates
    • Home Loans
      • Home Loan Rates
        • 15-Year Fixed Mortgage Rates
        • 30-Year Fixed Mortgage Rates
    • Insurance
  • Top Lenders
    • Best Student Loan Refi Companies
    • Best Private Student Loans
    • Best Personal Loans
    • Best Mortgage Lenders
    • Best Mortgage Refinance Companies
  • Company
    • About
    • Reviews
    • Blog
    • Editorial Staff
    • Editorial Guidelines
    • News
    • Press
  • Legal
    • Terms of Use
    • Privacy Policy

© 2022 Credible


Credible Operations, Inc. NMLS ID# 1681276 | NMLS Consumer Access | Licenses and Disclosures
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Disclosure

Affiliated Business Arrangement Disclosure

Credible Operations, Inc., (“Credible”) has a business relationship with Young Alfred, Inc., (“Young Alfred”), an insurance broker. Please click here for the full Affiliated Business Arrangement disclosure form. You are not required to use Young Alfred as a condition for settlement of your loan.

Similarly, Young Alfred has a business relationship with Credible, a mortgage broker. Please click here for the full Affiliated Business Arrangement disclosure form. You are not required to use Credible as a condition to obtain access to any settlement services, such as homeowners or other insurance products.

Acknowledgement

By clicking “Accept” below, I/we acknowledge that I/we have read the applicable full disclosure form, and understand that any referrals by Credible for insurance settlement services or any referrals by Young Alfred for mortgage settlement services, may result in Credible, Young Alfred, its parent company, and/or its affiliates receiving a financial or other benefit.