Should you buy a house after you retire?

February 17, 2022

Buying a house is a large investment, no matter how old you are.

If you’re considering buying a house at 65 years old, you should first look at your financial portfolio and perhaps even speak with a financial advisor to determine whether an investment of this size makes sense for you.

Next, you should find an experienced realtor who knows the local market and can help you negotiate a winning offer on the perfect house for your retirement goals. With an expert buyer’s agent at your side, there’s nothing stopping you from finding the house of your dreams at any age.

Ready to find a great realtor? Clever offers a free, no-obligation service that matches you with top-rated agents from trusted brokerages like Berkshire Hathaway and Century 21.

And on eligible purchases, you could also get a cash-back refund of 0.5% that keeps more money in your pocket!

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Is 65-years-old too old to buy a house?

If you’re 65, you’re not too old to buy a house — provided that you have the finances to make a down payment, cover your monthly mortgage payments, and keep up with expenses like maintenance and property taxes.

However, when you’re 65 or older, it is difficult to know if you’ll be able to live in the house long enough to see a good return on your investment. If you’re retired or close to retiring, you may have a limited income that must support you for an unknown period of time.

When you throw a considerable portion of those assets at a house, you add another unknown variable — the housing market. If the house you purchase does not appreciate or you can’t keep up with the mortgage payments, you could put yourself in an untenable financial position where you might be forced to sell the house to manage your debt load.

Put extra effort into researching the housing market with a local buyer’s agent. A qualified agent can help stack the deck in your favor by identifying properties that have the best chance of appreciating in value in a short period of time.

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Is it better to buy or rent in retirement?

The decision to rent or buy in retirement ultimately comes down to your financial situation and goals. With a house, you’ll have mortgage payments and maintenance costs, meaning that you’ll have less disposable income to live off of. Renting, on the other hand, will limit your costs, but it will also prevent you from building equity in a home as you age.

Buying in retirement

Buying a house in retirement depends on your assets and your income. If you have to finance a house, understand that adding a mortgage amplifies your financial risk. Even people with a high net worth can lose big by borrowing too much if the house they’re in doesn’t increase in value.

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Pros of Buying

Build equity by paying down your mortgage.
No unexpected rent increases
Customize your living environment with upgrades, renovations, etc.

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Cons of Buying

You are responsible for paying for property taxes, homeowners insurance and repairs.
Limited mobility — you can’t easily pack up and move if your life situation changes. You’ll have to sell your house.
You may not have enough time for the value of your house to appreciate.

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Renting in retirement

If you haven’t purchased a home before, you are probably already weighing the pros and cons of continuing to rent in retirement. Renting isn’t all bad, but it does come with some disadvantages.

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Pros of Renting

Flexibility! You can move with very little hassle.
No additional expenses like property taxes, homeowners insurance and repair costs.

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Cons of Renting

Annual rent increases could gradually make your rental unit too expensive.
You cannot renovate/modify your unit to accommodate mobility restrictions as you age.

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Should seniors rent or buy a condo?

Condos are a unique option for seniors to consider, since they can either be purchased like a home or rented from the condo owner. However, you should be aware that condo ownership often comes with additional fees, which might make them a poor option if you’re looking to keep monthly costs low.

The biggest difference between buying a condo and buying a house is that condos come with condo fees. Fees range widely and could be as little as $100 or as high as $700 per month and cover the condo association’s ongoing costs to maintain the property. When you’re living on a fixed retirement income, extra fees like this could really hurt your budget.

Of course, there are some unique advantages to owning a condo, like no exterior maintenance or lawn care.

Purchasing a condo may not be a bad option if you have the financial means to pay for it. Just make sure you include the condo fees in your calculation when you’re exploring purchasing options.

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Pros of Buying a Condo

No exterior maintenance or landscaping to worry about.
Smaller than most homes so less work for aging owners.
Ideal for retirees who like to travel because you can easily lock the door and be sure that your residence is secure.

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Cons of Buying a Condo

Condo fees are an added monthly expense on top of your mortgage.
The condo board has a lot of control over the building and could even raise your condo fees.
Condos only attract a particular type of buyer, so your unit could be harder to sell than a typical house.

If you aren’t ready to buy a condo, you might be able to rent one. Renting a condo is similar to renting an apartment. The biggest difference is that you’re renting from the condo owner, not a property management company.

The owner generally pays the condo fees and mortgage themselves and charges tenants monthly rental fees. However, because owners have to cover these costs, they might charge their tenants more for occupying the unit.

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Financing a home in retirement

While there is no maximum age for applying for a mortgage, you may find it is tougher to qualify for certain mortgage products.

Discrimination based on age is illegal due to the Equal Credit Opportunity Act.

However, when lenders underwrite a loan, they have to ascertain their risk. Therefore, the proof of income you have to submit when you are retired will be evaluated differently.

Lenders need to confirm that you have access to any assets that you might be using as a down payment, meaning they’re not locked into a retirement fund. For those in retirement, lenders consider 401(k)s, IRAs, and other retirement account distributions. These assets don’t qualify if they’re currently being used as your only source of income.

This can make things difficult, especially for borrowers whose assets are in retirement vehicles that may be subject to withdrawal penalties.

If you’re a veteran, be sure to check if you qualify for a VA loan. Another avenue to check if you are having a tough time qualifying with conventional lenders are FHA loans (Federal Home Administration).

Before applying for financing, make sure your credit is exceptional and that your debt-to-income ratio is low. You’ll have an advantage if you consult a financial advisor and an experienced buyer’s agent who knows the lending procedures in your local market before you apply for financing.

You can also save on your financing by finding competitive mortgage rates in advance. Don’t get pressured into taking the first mortgage offer you receive – shop around until you find a lender you’re comfortable with who’s offering you a great deal.

One of the best ways to find a great mortgage lender is to ask your real estate agent for recommendations. Experienced realtors know which local companies offer the best rates, service, and overall value, which makes it easy to find the right lender for you.

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Before you buy a house at 65

Once you’ve decided to buy, your next step is to contract the services of an expert real estate agent who is familiar with the lenders in your local area and knows what their qualification procedures are for retirees or those nearing retirement.

This will give you the best chance of educating yourself and getting a better mortgage product with terms that are favorable to you.

Your agent should help you find properties that: