According to a report from The Centre for Ageing Better, more than a third of over-60s could be choosing to rent, rather than owning their home, by 2040.
In January 2018, over 414,000 people aged 60+ lived in privately rented properties. In 2007, that figure stood at 254,000, signalling an increase of almost two fifths (39%) over a decade.
But, what are the reasons for renting, rather than owning, in later life, and could it be the right choice for you
1. You’ve never owned a home before
For those who have not owned a home, or had a mortgage before, the option to release money from an existing property does not exist. At the same time, there may not be enough time to find the money for a deposit, and a mortgage term which extends into retirement is not ideal.
That may mean that you have no choice but to continue renting in retirement, rather than going through the process of buying a home.
2. A more manageable home
Whether it’s due to size or accessibility, moving into a new home may become necessary during retirement. In some cases, renting a property may be a quicker process, making moving into a more suitable home easier and less stressful. You will still have to make these decisions, and it may be that renting is a short-term option on the way to another destination.
3. A better location
You might want to live in a new area when you retire. This could mean moving to your dream area or relocating to be closer to your family. Renting may be a good way to see if you enjoy living in a different location before moving permanently.
4. Increased flexibility
Throughout retirement, the features you need in your home could change rapidly. Unfortunately, this can cause a dilemma, as it may mean that owning your home will be easier, due to having the freedom to make adaptations and changes when necessary.
However, rented housing offers an easier way to move to a completely different property at short notice if the need arises. If the need to move includes physical downsizing, a new location or settling in a dedicated retirement facility, then leaving a rented home will be much easier than selling your property and buying a new one.
Some people may rent in later life due to financial constraints. Whilst it is unlikely that those who already own property or have engaged in retirement planning will face this problem, it may turn out that renting is more cost-effective in certain circumstances and can help you to increase your retirement income or have more to leave as a legacy.
6. You’ve already sold your house
Some people may be renting after selling their family home. This may have been necessary to pay an interest-only mortgage. If the money released was not enough to cover both the capital payments on the mortgage, as well as funding the purchase of a new home, they may have no choice but to rent.
The potential downfalls of renting in retirement
Naturally, renting your home in retirement is not without its downsides, which could include:
- Maintenance issues: When the home you live in is owned by someone else, the responsibility lies with them to make sure that all fixtures and fittings are in a good condition. Unfortunately, that does means that, where maintenance is concerned, some things that you will be used to handling yourself as a homeowner, will be out of your control.
- A lack of permanence: While renting offers the ability to move to a new location or more suitable home at short notice, the same flexibility is also offered to landlords. Owning your home comes with a guarantee that, if the mortgage is paid, you are unlikely to be forced to leave.
- Rent may be seen as dead money: While owning property is usually perceived as an investment, paying rent does not increase your rights or ownership of your home, so it may feel like a pointless, but necessary, endeavour.
How could financial advice help?
As independent financial advisers, we can offer you a broader view of your situation and the solutions available to you. We can also introduce you to options you might not have thought, or even heard, of. By talking to a professional, you can benefit from increased confidence in your financial decisions and the knowledge that you have taken charge and given yourself the best chance to meet your financial goals and aspirations.
To get started, get in touch with Bev or Sarah on 0115 933 8433.