Current homeowners often look forward to paying off their mortgage and being the full owner of their home. No more loans, no high-interest payments—you can kick back, relax, and enjoy your home in retirement.
But what if you have to move?
Maybe you need to downsize because your current home is simply too big for you or your income level has changed. Maybe you’ve always dreamed of retiring in one of San Diego’s beautiful neighborhoods near the mountains or the beach. Or perhaps you simply want to move closer to your loved ones.
Whatever the case, you may be considering the all-important question: Should I rent or buy a home in San Diego as a retiree?
Despite what some may tell you, the answer isn’t quite so cut and dry. And in fact, the answer will be different for each person, depending on their specific circumstances.
So if you’re planning on moving in retirement age, make sure you consider the pros and cons of renting vs. buying.
Renting or Buying: Which Is the Better Investment?
Buying a home is often the more attractive option because you can build equity over time. And what you build in equity can be passed on to your children later on. The money you spend in monthly rent payments, on the other hand, doesn’t go to building your equity.
But homeownership comes with often hidden costs—costs you wouldn’t have to think about as a renter. Some of those expenses include:
Homeowners insurance: Most mortgage lenders require borrowers to have homeowners insurance. (And it’s a good idea to keep it even after you pay off your home.)
Other types of insurance: Many lenders also require you to have insurance for natural disasters if you live in certain areas. For instance, if you live in a flood zone, you may need to buy flood insurance, or you may need earthquake insurance if you live in an earthquake-prone area.
Maintenance and repairs: Broken refrigerator? Rotting wood in the porch? A/C or heating unit on the fritz? Those are all expenses that come out of your pocket as a home owner. And don’t forget landscaping costs!
Bug control: If you want to keep common bug infestations at bay, you may need to spend several hundred dollars a year on a bug-control service.
Property taxes: If you owned your home for decades and had homestead exemption, you can expect quite a spike in your property taxes if you purchase a new home.
HOA fees: You can spend upward of several hundred a month on HOA fees, depending on the neighborhood.
Utilities: As a homeowner, you’re responsible for paying for water and energy (whether electricity or solar energy) as well as trash removal.
Some retirees choose to take the money they would have spent on these extra expenses and invest it into conservative accounts that yield a higher return.
Before You Buy a New Home as a Retiree
Let’s say you’re leaning toward buying your dream home. You should first consider how much of a down payment you will put down. Can you pay for the house in full after selling your current home? Or will you put down a larger-than-normal deposit to shorten the mortgage length?
This is often how retirees want to finance their new home, but it’s important to talk to an expert before doing this. Paying too big of a down payment could put you at risk of being cash-poor.
It’s important to think about your physical health, too. Some retirees find they can no longer do the landscaping or more physical chores like they used to. Can you afford to hire someone for these tasks?
If you’re ready to buy your new home in retirement in San Diego, contact us and learn how we can help you get the best deal!