In a recent infographic, we looked at the top destinations for people looking to relocate during retirement. But after figuring out where to move, retirees face another major decision: is it better to rent or own a home? We lay out some of the perks of each scenario.


The Benefits of Buying

Being a Homeowner Comes With Tax Breaks —

The mortgage for one home may be more than the rental cost of another — but that doesn’t always mean the rental is a better deal. Investopedia notes that mortgage interest and property taxes on a primary residence are tax deductible, which may allow you to spend slightly more on your monthly mortgage than you would on your rent (which is not tax deductible).

Mortgages Offer Predictability —

AARP points out that home values are expected to increase by about 1.7 percent over the next year. Rental prices, meanwhile, go up 5 to 6 percent each year on average — double that rate in some parts of the country. The organization notes that when you factor in low mortgage rates, buying can be a smarter financial move than renting. Plus, a fixed-rate mortgage allows you to know exactly what you’ll pay each month. Your rent, on the other hand, could go up over time.

You Don’t Need Your Home to Be an Investment —

If you do decide to buy, Investopedia suggests thinking of it as a cost of living expense rather than as an investment asset. The site notes that doing so will allow you to better categorize and plan your retirement costs. However, to make the most of a home purchase, the site also urges you to remember an important investment-related rule: buy low and sell high.

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The Benefits of Renting

Less of a Financial Commitment —

When trying to decide between renting and owning, ask yourself how steady you expect your income to be during retirement. Stan Humphries, chief economist at real estate website Zillow, tells AARP that if you believe your income might be unpredictable, the long-term financial commitment that comes with a mortgage may not be the best fit for you.

Better Suited For Shorter Time Frames —

Humphries also notes that it’s important to consider your timeframe. “The shorter your time horizon, the more it makes sense to rent,” he tells AARP. While the traditional thinking was that it took three years for a homeowner to overcome the purchase costs associated with a new home, newer thinking pegs it at five. So if you think you’ll be moving again in two or three years, you may want to rent.

Easier to Walk Away —

Even if you’ve always dreamed of moving to Miami or Phoenix, it may make sense to rent if you haven’t lived there before — at least initially. You never know when a city you thought you’d love could turn out to be the wrong place for you. Jed Kolko, chief economist of real estate website Trulia, tells AARP that renting allows you to figure out if you really like your new city, and notes that moving shortly after buying a home can be costly.

Do you think it’s smarter to rent or buy a home during retirement? What other things should retirees keep in mind when looking for a new home?