Some people are not house people. When the weekend comes around, they’d instead take the Jeep out to the countryside for a four-wheel adventure, or maybe pull out the fly rod to catch some big trout, or even take the family on a long weekend RV trip.
But one thing that is owning a home can give you upon turning 62: A reverse mortgage. This variety of home loans allows you to tap into all that equity you’ve been building up for years.
The major pro of the reverse mortgage is that it can earn you hundreds of thousands of dollars depending on how long you’ve owned your house. You can take the money in one lump sum or monthly distributions, and you don’t have to pay the loan back until you leave the house or die.
But therein lies one of the cons to a reverse mortgage. You’re stuck living in the same old house, which can limit your freedom to live and do what you want. It’s also highly likely your kids will be stuck with the bill when it comes to paying the mortgage back. You also need to maintain your home, or a bank offering a reverse mortgage can insist on the proceeds being paid back early.
To find out about all the reverse mortgage pros and cons, it’s best to consult with a financial advisor.
But what if you’re not a house person? What keeps you from wanting to make one of the potentially best investments of your lifetime? According to a recent report from Investopedia, owning a home is a lifelong goal for most Americans. But it’s only for some. Traditionally, people have either invested in a home someone else built or built on their own.
Others choose to rent.
While renting doesn’t offer the investment advantages home-owning does, it does offer a certain amount of freedom to come and go when and where you please. It also suits certain people’s unique financial circumstances.
That said, here are some advantages to renting over owning.
No Repair or Maintenance Costs
This is a huge advantage of renting. It means if the fridge goes bad, a new one is installed for free. The same goes for the plumbing and the leaky roof. Your landlord takes full responsibility for the cost of repairs and maintenance.
If you own a home and your boiler goes, you’re out a couple of thousand dollars. There goes that trip to Europe you’ve been planning.
Renting means you might have access to certain amenities you otherwise would not be able to afford. Many rental complexes come with full gyms and in-ground pools. Others come with social spaces. Some even offer eateries and bars for socializing.
Real Estate Tax Exemption
While you technically don’t have to pay real estate taxes when you rent, its cost is figured into your rent. But it still means you don’t have to worry about cutting a check twice a year for property and school taxes.
Real estate taxes are said to be a major burden for some homeowners. Depending on your property and location, they can cost thousands of dollars.
Forget About Down Payments
While renting does require a refundable security deposit (usually the equivalent of one or two months’ rent), purchasing a home can require a hefty down payment that can empty your savings account. Says Investopedia, the typical down payment for a home is around 20 percent of the home’s value.
However, that down payment can pay off in the long run in the form of home equity, especially if you’re planning on applying for a reverse mortgage one day. Also, once your home is paid off, you have a major investment that a renter will never realize.
But keep in mind it usually takes many years, if not decades, to pay off a home which can keep you from fully enjoying your young and middle years to their fullest.
More Freedom to Live Where You Want
Renters can choose to live wherever they choose. This is especially true for freelancers such as writers who could live on the Moon if it were practical and had WiFi. On the other hand, homeowners are severely restricted to areas where they can afford the cost of living.
If you’re planning on purchasing a home on Park Avenue in New York City, you had better be worth tens of millions of dollars. While rents in places like New York are super expensive, too, it still costs less than purchasing a place. And you don’t need to pay for repairs.
Owning your own home is a personal decision, and it’s not to be taken lightly because a home requires constant care and that costs money. Homeowners also need to remember that their home has the risk of decreasing in value.
That’s another reason renting holds a certain appeal to people who want to be free and also wish to pocket the extra cash they need not spend on the many costs associated with homeownership.