Transitions: Home Buying Decisions for Retirees

Purchasing a new home at any stage in life brings up various financial considerations and opportunities, but for retirees considering buying a home, there are some extra things to think about.

Down Payment

At the onset, initial costs may be a key consideration. Some retirees may consider paying cash for a home, without a mortgage. That sometimes is best for the budget, but keep in mind that when you buy a house for cash, the house you live in is not an investment – you are investing in an illiquid asset. Sometimes it makes sense to have a mortgage, and allow for savings to continue to grow. Be sure to compare the cost of a mortgage with what you may earn on your savings. If your potential mortgage rate is higher than your savings returns, you may want to analyze your options.

Ask yourself some of these questions. What are you living on – pension, social security or retirement savings? Does it make more sense to pay extra per month to save in upfront costs or put down a larger down payment to get lower monthly costs? Do you still have children in college, and if so, does tuition play a role? A financial advisor can help determine the right balance between monthly costs and maintaining cash liquidity.

Monthly Payment Options

Buyers who are retired and on a fixed income may need to evaluate their housing costs within their budgets. But retired homeowners who have equity in their current property and/or good income from savings or pensions have several options for using the value of their home. They could consider loans such as a reverse mortgage or refinancing to stay in their current home. Or they could sell the property and use the proceeds to buy a more compatible home. Your financial advisor can provide guidance on which option would be best for your long-term financial success.


Maintenance of a home can be a consideration not only financially, but physically. First, an older home that has not been maintained well can easily turn in to a money pit. Second, retirees may not be able to do home repairs or projects like they might have in the past. Some retirees might need to modify the home, which can also raise costs, especially if security is a concern and gates and alarms need to be installed. Even caring for a yard can become a challenge, resulting in having to hire help. For some, all these factors could mean renting is a viable option.   


There are benefits to downsizing, and in many cases, it also makes sense to do so. Families with grown children who have moved out may now have unnecessary space, which is not only wasted but requires costly maintenance. A larger house may also incur more taxes, which will greatly affect the household budget. Even if there’s a low or no mortgage, higher taxes could prove problematic. A condo might be better in cost, but HOA fees must also be factored in. And eventually, any home will have to be sold. Is there a plan in place for that? And what about renting your next home? It pays to evaluate these options based on finances, what you most want to do in retirement, and where you expect to find yourselves in the future. Perhaps assisted living would be your next move. In addition, the 2018 tax law changes may make renting more attractive with the changing deductions.

If downsizing is an option, all these factors must be weighed against the goals of downsizing. What are you trying to accomplish? Do you need to be close to family and healthcare? While downsizing might be challenging in terms of giving away or selling long-loved pieces of furniture and other belongings, in the end, it could be the best decision financially, but it is not a simple solution.    

Aging in Place

Aging in place is a relatively new concept that helps retirees keep their current homes as they get older. For retirees who have a home and mortgage the right size, this could be a viable option. There are ways to make a home accessible for seniors, and there are many useful information sources that can provide ideas. Some homes are already senior-friendly. If you are moving, weigh the costs between purchasing an aging-in-place home versus a home that would require modifications. Also find out if your long-term care insurance covers the costs of adapting your home if the need arises.

Each phase of life requires its own approach to home buying to ensure financial stability. If you are a retiree considering a move, be sure to consult your trusted financial advisor to weigh your options.


Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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