You worked hard. You saved and like 80 percent of the 41 million Americans over 65 you own your home. You achieved the dream and we hope you’re living it. But there is concern about the future for older homeowners and the mortgage debt they might be carrying. Baby Boomers may want to listen up.
A decade ago, most older homeowners had paid off their mortgages. Today, that’s not the case and people with mortgages owe more than ever before. The median mortgage debt for people over 65 increased by 82 percent, according to the U.S. Census Bureau. And because a home is the greatest asset for most, the decline in equity is a bad sign.
It’s also troubling that most older homeowners spend more than 30 percent of their income on mortgage payments. It’s estimated that 4.4 million retired homeowners with mortgages struggle to keep up payments.
That’s why the Consumer Financial Protection Bureau (CFPB) issued an advisory to warning about mortgage debt for older Americans.
CFPB Director Richard Cordray said, “A home can be a place of security for older Americans in their retirement years – a roof over their heads as well as a valuable asset. But as more seniors carry significant mortgages into retirement, they put themselves at risk of losing their nest eggs and their homes.”
The CFPB suggests steps you can take:
- Plan for your mortgage payoff date and include that in your retirement plan.
- Before paying off a mortgage, talk about the tax implications with your attorney and accountant.
- Think twice about getting a new mortgage, refinancing or tapping into your home equity.
- If you do get a new mortgage, beware of the details and make sure the payments wont be burden in later years.
- Consider choosing a 10-15 year mortgage when you are close to retirement. Your mortgage payments will be higher now, but you’re less likely to have a mortgage in the years to come.
- Before you take a home equity line of credit, take a hard look at the fees and the costs that eat into your equity.
- Remember that using your home equity to consolidate loans or credit card debt is risky. If you miss payments, a home equity lender can foreclose on your home.
- Estimate your retirement income and expenses. Consider that you might have to modify your home as you age and that can be extremely expensive.
THE BOTTOM LINE
The idea behind this dismal warning is to get us to think about our how our homes and our mortgage debt figure into our retirement plans.
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