Am I too old to buy a house?

Q: I'm in my 50s and thinking of buying a house for the first time, but I'm starting to get cold feet. Does it make sense to buy a house when I might be retiring in 15 years or so? Does it make sense to choose a 30-year mortgage if I don't expect to be in the house for 30 years?

A: First, let's take on the question of age when a buying a home. At age 50, most people still have a long life in front of them -- typically another 30 years or so. This means you should still think of yourself as making decisions for the long term. Therefore, this comes down to a question of which makes more sense for the long term: renting or owning?

The answer to that question comes down to the details, including the level of rent and home prices in your market. Today's mortgage rates tilt the playing field in favor of owning because they are so low they make buying a house more affordable. In essence, there are two things you should think about:

  1. What can I afford? Owning may be more expensive on a month-to-month basis, so you want to make sure you can afford the additional costs, including mortgage, maintenance, insurance, and taxes. You should also have a plan for meeting those expenses once you retire.
  2. What's the best value in the long run? Building equity as a home owner is likely to add to your wealth more over time than the money you would save by renting rather than owning. That equity might come in handy in your later years.

As for the length of the mortgage, there is nothing wrong with choosing a 30-year loan even though you may only be in the house for 15 or 20 years. However, if you can afford the higher monthly payments, be advised that 15-year mortgage rates are about 80 basis points cheaper than 30-year rates.

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