I'm About to Retire and Have Never Owned a Home. Should I Buy or Continue Renting?

Many people buy homes in their 20s, 30s, or 40s and then opt to stay put in retirement or downsize if they don't need as much space. But what if you've never owned a home before and are reaching retirement age?

There's no such thing as being too old to own a home. And even if you're approaching retirement, it's possible to get a mortgage as long as you meet a lender's requirements in terms of factors like your income and credit score.

The upside of owning a home in retirement is the stability factor. As you age, it can become harder to pack up and move. With a rental, you perpetually run that risk, since your landlord isn't obligated to continue renting to you beyond the length of your lease.

If you buy a home and keep up with your mortgage payments and property taxes, you're guaranteed to be able to stay. The same holds true if you can buy a retirement home in cash.

But becoming a first-time homeowner in retirement could pose some challenges you should know about. And you may find that renting is a better match for you financially.

When your housing costs aren't locked in

It's common for people's income to drop in retirement. Think about it -- you're going from earning a paycheck to living off of your savings and Social Security. There may be a pension in the mix, too.

But all told, many people have less monthly income available to them in retirement than during their working years. Given that, you may find that renting a home makes more sense financially because your monthly costs are fixed for the duration of your lease.

Let's say you sign a two-year lease for a rental costing $2,000 per month. As a general rule, your housing costs should not exceed 30% of your income -- both when you're working and in retirement. So if you have a monthly retirement income of $6,700, paying $2,000 per month in rent works.

You may instead decide to buy a home that has you paying a $1,500 monthly mortgage and $500 a month in property taxes and homeowners insurance combined. That brings you to that same $2,000. But what if after a year, your property taxes and insurance costs rise to $600 a month, but your retirement income is still the same at $6,700? Suddenly, you're at $2,100 a month, which is over the recommended 30% threshold.

Also, when you rent a home, you don't have to spend a dime on repairs or maintenance. When you own a home, these are costs that need to somehow fit into your budget. They can also be hard to estimate. You may not want to take on unknown expenses at a time in your life when your income is falling.

Think through your choices before buying a home

Retirement could be the perfect time to venture into homeownership. If you're not working, you may have the time to do required maintenance yourself, and you might even enjoy having home improvements to tackle as a way to keep busy.

But if you've always rented before, the unpredictable nature of homeownership could throw your retirement finances for a loop. So think about that carefully before deciding to buy. And if you do opt to buy, make sure you have a dedicated emergency fund for home-related expenses in case your repair costs are higher than expected.