Keeping a Mortgage After 65: A ‘No Brainer’ or a Big Risk? (2024)

Business|Keeping a Mortgage After 65: A ‘No Brainer’ or a Big Risk?

https://www.nytimes.com/2024/02/17/business/retirement-mortgage-investing.html

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retiring

Fueled by once-low rates, more older Americans have mortgage debt, according to new research. But the downsides can be significant, some experts say.

By Martha C. White

Conventional wisdom dictates that retiring with debt — especially a debt as large and significant as a mortgage — is financially dicey at best and potentially ruinous at worst.

That’s not how Brian Lindmeier sees it. “It just doesn’t make any sense at all to pay off the house,” he said.

Mr. Lindmeier, 80, a retired purchasing and inventory manager, and his wife, Cindy, who retired from the local public school system, refinanced their home in Orange, Calif., at the end of 2020. They rolled over their balance into a new 30-year loan and slashed their interest rate in half to a rate below 3 percent. Mr. Lindmeier called the move a “no brainer.”

“The money I’d have to take out of my savings or out of my investments is yielding higher interest than the interest I’m paying on the loan,” he said.

For a growing number of older Americans, signing up for a mortgage that is likely to outlive them makes good economic sense. A significant percentage of homeowners have fixed-rate mortgages with historically low rates. Roughly six of 10 mortgage borrowers in the third quarter of last year held loans with interest rates of less than 4 percent, according to the online real estate brokerage Redfin. Nearly a quarter had rates of less than 3 percent.

A campaign of rate increases by the Federal Reserve, which is intended to tamp down inflation, has driven yields that investors can get on ultrasafe instruments like certificates of deposit to 5 percent or higher.

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Keeping a Mortgage After 65: A ‘No Brainer’ or a Big Risk? (2024)

FAQs

When should retirees not pay off their mortgages? ›

Paying off your mortgage may not be in your best interest if: You have to withdraw money from tax-advantaged retirement plans such as your 403(b), 401(k) or IRA. This withdrawal would be considered a distribution by the IRS and could push you into a higher tax bracket.

At what age should you no longer have a mortgage? ›

To O'Leary, debt is the enemy of any financial plan — even the so-called “good debt” of a mortgage. According to him, your best chance for long-term financial success lies in getting out from under your mortgage by age 45.

Is it a good idea to have a mortgage in retirement? ›

Key Takeaways. Carrying a mortgage into retirement allows individuals to tap into an additional stream of income by reinvesting the equity from a home. The other benefit is that mortgage interest is tax-deductible. On the downside, investment returns can be variable while mortgage payment requirements are fixed.

What percentage of people over 65 still have a mortgage? ›

In 2022, researchers found that just over 40 percent of homeowners older than 64 had a mortgage, a jump from roughly 25 percent a generation ago. Ultralow mortgage rates were a big driver of the increase, said Jennifer Molinsky, project director of the center's housing and aging society program.

What does Suze Orman say about paying off your mortgage? ›

Orman explained that if you have a 30-year mortgage and you've already made payments for 14 years, you should make it a point to get a refinanced mortgage paid off in 16 years. Otherwise, if you refinance for another 30 years, you'll end up paying for your mortgage with interest for 44 years in total.

Is it good to be mortgage free? ›

The benefits of paying off your mortgage

Being mortgage-free can make it easier to downsize in other ways – such as going part time – and usually makes it cheaper and easier to buy and sell your home. Generally, a smaller mortgage gives you greater freedom and security.

At what age do most people pay off their house? ›

But with nearly two-thirds of retirement-age Americans having paid off their mortgages, it means that the average age they have gotten rid of that debt is likely in their early 60s. Stats from 538.com, for example, suggest the age is around 63.

Can a 65 year old get a 30 year mortgage? ›

Absolutely. The Equal Credit Opportunity Act's protections extend to your mortgage term. Mortgage lenders can't deny you a specific loan term on the basis of age.

Do the rich pay off their mortgage? ›

Many ultra rich people have mortgages because it's generally the best option from a financial standpoint. Even Warren Buffet took a mortgage to buy his house. Paying off your mortgage is dumb financially. It's only a good thing for middle class people that very emotional and scared of losing it all.

How long will $500,000 in 401k last at retirement? ›

Summary. If you withdraw $20,000 from the age of 60, $500k will last for over 30 years. Retirement plans, annuities and Social Security benefits should all be considered when planning your future finances. You can retire at 50 with $500k, but it will take a lot of planning and some savvy decision-making.

How much to retire if the house is paid off? ›

If you pay off your mortgage and debts before retiring, you could live on smaller portion of your preretirement income. Based on this rule, if your annual preretirement income was $100,000, you need $80,000 a year in retirement to cover your expenses.

What if I have no money when I retire? ›

You may have to rely on Social Security

Many retirees with little to no savings rely solely on Social Security as their main source of income. You can claim Social Security benefits as early as age 62, but your benefit amount will depend on when you start filing for the benefit.

Do most retirees have their homes paid off? ›

This problem has become more pressing over the years. Half of the retired homeowners who were born in the early years of the baby boom wave are still making mortgage payments. They are in a very different situation than their parents' generation when the majority of retirees owned their homes free and clear.

Should an elderly person pay off their mortgage? ›

You want to save on interest payments: Depending on a home loan's size, interest rate, and term, the interest can cost hundreds of thousands of dollars over the long haul. Paying off your mortgage early frees up that future money for other uses.

What age is considered elderly in mortgage? ›

No age is too old to buy or refinance a house, if you have the means. The Equal Credit Opportunity Act prohibits lenders from blocking or discouraging anyone from a mortgage based on age. If we're basing eligibility on age alone, a 36-year-old and a 66-year-old have the same chances of qualifying for a mortgage loan.

Is there any reason not to pay off a mortgage? ›

So all things being equal, it often is wise to pay that off. However, if you urgently need to boost your retirement or emergency funds, or if you have corrosive debt like an unpaid credit card, it can make sense to delay paying off your mortgage.

Is it better to save more for retirement or pay off mortgage? ›

It's typically smarter to pay down your mortgage as much as possible at the very beginning of the loan to avoid ultimately paying more in interest. If you're in or near the later years of your mortgage, it may be more valuable to put your money into retirement accounts or other investments.

Can a 70 year old get a 30 year mortgage? ›

You Can Get a 30-year Mortgage at Any Age

You could be 99 years old and get a 30-year mortgage as long as you qualify. The lender may not deny a loan because they don't think you'll live long enough to pay it off.

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