Asked by helen_w29  |  Submitted February 27, 2017

Should I continue renting or buy a home?

I will retire in the next 16 years and collect a pension and withdraw from my TSP plan with the government. The plan is to move to a different state after retirement. Would it make sense to buy a home with a 30-year mortgage, pay it off in 15 years, and turnaround and sell after I retire?

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  Answers  |  2

February 27, 2017

That's a broad question, like if it's better to get married or keep dating. Everybody has an opinion, and the answer largely depends on the individual. But as it relates to real estate investing, owning is generally better than renting.

From a financial standpoint, you have to look at the price-to-rent ratio to compare which is better.

Renting is nice when you don't like to be bothered with the maintenance of the home and don't have a down payment to commit to purchasing.

I think a better question might be which would cost you more in the long run? Well, renting indefinitely costs you X per month for the rest of your life. Buying will cost you the mortgage payment for 30 years, plus maintenance, plus property taxes and insurance. However, subtract the future value of that house 30 years from now, plus the tax deduction that you enjoy over the next 30 years. I believe what you will find is that there's just no comparison. Any fool that bought 30 years ago is more than likely overjoyed that they did, and wished they bought two.

Still not convinced? Here's an even easier way to think of it: In feudal times, lords owned the land and the peasants worked it. The nobles were wealthy and the peasants scratched out a meager existence. Essentially, being a renter and paying your landlord is a little bit like that.

However, having read the details of your situation I would say that in your case, it would make sense to pay it off in 15 years, and then decide from there if you'd like to sell or keep the home.

$commenter.renderDisplayableName() | 09.18.19 @ 05:22

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March 07, 2017

Helen - thanks for the question,

Our idea makes sense as it will allow you to receive some interest write off as you work plus it will allow you to develop equity in the home as you pay down the loan, plus using a 30-yr-fixed option you will receive flexibility on being able to make the smaller 30-yr-fixed payment if you need to. You should consult with your accountant / cpa ( if you have one ) to determine what the difference in taxable income would be over the 16 yr period if you were to pay the loan off slower and save the difference.

Dave Skow
Feel free to contact me through my profile.

$commenter.renderDisplayableName() | 09.18.19 @ 05:22

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