Pros and cons of renting in retirement
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When home prices are rising, rents generally increase as well,
Bland adds, saying, "Higher rents will decrease the overall purchasing power
of renter's incomes whereas higher home values accrue to the homeowner or his
or her heirs. The imputed rent rises, but the homeowner doesn't have to pay it
or taxes on it."
Freddie Mac, the government agency that
guarantees mortgages, provides a guide to owning
and keeping a home and work
sheets for budgeting homeowner costs, maintaining and repairing appliances
and hiring a contractor for renovations.
"Renting is generally
cheaper in the short run, but there is a point a certain number of years out where
it gets more expensive to rent and less expensive to own," says Dorula.
"Homeowners
can tap into their equity in a number of ways, and that option isn't open if you
rent."
Emotions of owning vs. renting
While the emotional aspects of renting are less concrete than the financial aspects,
they are an important part of the equation. Carefully exploring your attitudes
and your ability to adapt to changes going forward is a must.
"There
is no one-size-fits-all," Marion says. "I recommend that seniors talk
to their friends who have been through the experiences of staying in their present
home, downsizing or renting to get an idea of what it's like. You also need to
think about your needs going forward -- do you want freedom from responsibility,
do you want to travel? That gives you a baseline to make these types of big decisions."
Renting
provides more freedom, but owning provides more security. "Owning provides
more control," says Dorula. "When you rent, there is always a chance
that ownership of the building where you live could change hands or the property
could go condo and you'd have to move. If I decided to rent, I would insist on
a long-term lease."
On the other hand, if your health
or your spouse's health fails, you may need to move to an assisted living or nursing
care facility on short notice. "In a down market, it can be very difficult
to sell a house," says Marion.
While owning a home can
provide a lot of emotional security, a house isn't a liquid asset.
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