The ABCs of Getting a Mortgage Loan for First-Timers

Posted on: 15 February 2022

Many Americans plan to downsize their living arrangements when they retire. Selling a larger home that you no longer need, moving to an area with lower costs of living, or reducing your home maintenance burden are all great ways to boost your retirement nest egg and make it less stressful.

But before you start shopping for a replacement property to buy, consider the value of renting for a while first. Why? Here are five of the many ways it can contribute to a more stable, enjoyable retirement. 

1. Learn Your New Budget. Changing from the budget of an income earner (or two) to retirees can be challenging. Even though most retirees try to plan their new monthly spending and retirement withdrawals before actually retiring, this is a work in progress. Taking a year or two to adjust to your new financial life before making a major purchase will help set you on a good path. 

2. Decide About Moving. Many people take the chance to move upon retirement, usually either to be closer to family or to live in a more amenable area. But a big move is a commitment, especially if you've never lived in the area before. A home rental gives you the chance to be certain about your new surroundings before you commit to buying a piece of real estate. 

3. Find the Right Size. When people talk about downsizing, they often speak as though it were one single action. But there are many ways to downsize, including renting versus buying, choosing different sizes of home, and considering extreme options like RV living. Take your time to find the right method of downsizing so that this cost-cutting move remains a positive change instead of a new burden. 

4. Protect Your Nest Egg. The last thing you want as a retiree is to become what's known as house poor. House poor people put all their money into a home — a very illiquid asset. This can leave little or no money for maintenance, other living expenses, and fun activities. Renting a home instead means your cash will work for you longer and provides the flexibility a house cannot. 

5. Avoid Too Many Changes. Retirement is categorized as a major life change. Adjusting to one life change is hard enough, so you may not want to add any more — including buying real estate or committing to a long-distance move — until you've adjusted. Space out your major life changes so you can be certain you're emotionally and financially ready. 

Want to know more about the home rental market in your retirement destination? Start by meeting with an experienced real estate agent in the area today who specializes in rentals. When you find the right temporary living situation, your retirement will start on its best possible footing.