More Seniors Opt Not to Pay Off Mortgage
June 6, 2017
Many retirees are preferring to keep a mortgage, even if they have the means to pay it off. They say they want to take advantage of low mortgage rates and tax rates and free up their savings for other uses, The New York Times reports.
Read more: Help Boomers Start Navigating Retirement
But without a full-time job, are they able to still qualify for a home loan? Banks say they are still willing to lend to retirees, as long as they have regular monthly income coming in, like a pension and Social Security, or have retirement assets.
Still, older borrowers “shouldn’t be making assumptions based on what happened in the past,” says Brian Koss, the executive vice president of the Mortgage Network, in Danvers, Mass. “‘Oh, I can get a mortgage anytime—I have all this money in the bank and great credit.’ After the financial crisis, the regulators rightfully built in ability-to-repay regulations using a spelled-out rule book of how to qualify to ensure monthly payments are made.”
That said, government financing giants Freddie Mac and Fannie Mae have made policy changes that allow eligible retirement assets to be used to qualify under certain conditions.
That is opening the door for more retirees to get a mortgage.
“Historically, people would pay off their mortgage in 20 to 30 years and have a mortgage-burning party,” Lori A. Trawinski, a senior strategic policy adviser at the AARP’s Public Policy Institute, told The New York Times. Nowadays, however, “we see that people are carrying mortgage debt at older ages, and it’s both the percentage of families carrying the debt and the amount of debt that has increased.”
About 42 percent of households headed by a person aged 65 to 74 has mortgage debt, according to the Federal Reserve’s 2013 Survey of Consumer Finances. In 1992, just 18.5 percent of households had debt at that age; in 2004, 32 percent did.
Source: “Mortgages for Seniors? Available, but Exacting,” The New York Times (June 2, 2017)
Updated: January 22, 2021