The share of older renters has risen substantially over the past decade, with households aged 55 and over contributing 42 percent of renter household growth, according to a 2015 report by the Joint Center for Housing Studies at Harvard University. That rate is expected to increase as more Baby Boomers retire.
However, there are factors to consider before deciding to trade your home for an apartment. Here are some of the advantages and disadvantages to becoming a renter when you retire.
Pro: No more mortgage!
Tired of slowly chipping away at your home loan? Your monthly mortgage payments will become a thing of the past when sell your home and start living life as a renter. (Sweet relief!) Depending on your financial situation, this could even mean you're entering retirement completely debt-free.
Con: No more tax breaks
Uncle Sam offers homeowners some solid tax incentives, including deductions for property taxes and mortgage interest. These savings can add up, especially if you live in a state with high property taxes like New Jersey, says Bob Eisenlauer, a real estate agent at Re/Max in Central Iowa.
Pro: You're not tied down
If your dream retirement involves traveling, you’ll appreciate the flexibility renting gives you. "Since you don't have a house to maintain, you can come and go as you please," says Nancy Newquist-Nolan, a real estate agent at Pacific Coast Realty in Santa Barbara, CA.
Con: You lose 'homeowner' status
There's a sense of pride that comes with being a homeowner, says Judy Weiniger, broker associate and CEO at Weiniger Group in Warren, NJ. You may also have an emotional attachment to your home if you've been living there for a while. Thus, you need to make sure you're mentally prepared to sell your home and move on.
Pro: You'll stress less over maintenance
One of the biggest burdens of homeownership is property maintenance, which becomes more cumbersome as you age. If you own a single-family house, you're probably the person responsible for not only making repairs, but also handling the manual labor, such as mowing the loan, shoveling snow, or cleaning the gutters. When you sell your home and move into a rental, the landlord or property management company is generally responsible for these tasks.
Con: It may be more expensive to rent
Depending on where you live, it's typically cheaper to own a home than it is to rent. Also, from a home loan perspective now is a good time to get a mortgage, since interest rates are low. In fact, rates for a 30-year fixed mortgage recently dropped to a historic low of 3.25 percent.
Pro: You get amenities (without the fees)
If you currently live in a single-family home, moving into an apartment building might give you free access to amenities such as a swimming pool, fitness center, party room, lounge, and private parking. If you plan to travel a lot during retirement, living in a building with a concierge who can accept packages for you is a nice perk, says Nolan.
Con: You're at the mercy of a landlord
If you've been a homeowner for a while, you're not accustomed to having a landlord or property management company. You can try to do some screening before you sign a lease by talking to previous tenants and finding out how quickly the landlord responded to maintenance issues, but the truth is you won't really know whether a landlord is good or bad until you live in the apartment. Also, depending on what your lease agreement says, your landlord or property management company could decide to raise your rent when your lease is up.
Pro: Cheaper insurance
The average renter’s insurance policy costs between $180 and $360 per year, according to the National Association of Insurance Commissioners. Meanwhile, homeowners insurance costs significantly more.
Looking for more information about renting? Check out our Renters Guide.
Related:
- Lease Agreements: 5 Things You Didn't Know You Could Negotiate
- How to Avoid Breaking Your Lease
- 5 Ways to Score a Lease in a Competitive Rental Market
What's negotiable in a rental contract?
Take our brief survey and let us know if you would consider modifying a rental contract.
Landlords: Are you willing to modify your rental terms?
Renters: Is it worthwhile to negotiate, even if you risk losing the unit?
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