Consumer Watchdog Warns: Mortgages And Retirement Don't Mix
A growing number of retired Americans have more mortgage debt, less affordable loans and are at a greater risk of foreclosure than prior generations, the Consumer Financial Protection Bureau said in a new report.
What’s the big deal about having a mortgage during retirement?
- Income typically falls during retirement, so you have less money to pay your mortgage.
- More than half of retired homeowners with mortgage debt spend 30 percent or more of their household income on housing.
- Home equity is a primary, and sometimes only, asset for retirees. Less home equity results in less financial security and greater financial risk.
About 80 percent of Americans age 65 and better own their home. The percentage of homeowners with a mortgage rose from about one in five to nearly one in three between 2001 and 2011.
The median amount they owed rose from $43,300 to $79,000 between 2001 and 2011.
What To Do To Protect Yourself
The CFPB suggests three things to protect yourself and your home:
1. Know your mortgage pay-off date.
If you don’t know it, call the phone number on your monthly statement and ask your mortgage servicer.
When you refinance to get a better interest rate, opt for a shorter mortgage term so your loan is paid off before you retire.
2. Guard your home equity.
Consider other options, like downsizing, before taking out a home equity loan or doing a cash-out refinance.
3. Know your retirement income and expenses.
Most of us have less income when we retire. Run the numbers by doing a monthly budget before you retire, especially if you’ll have a mortgage to pay.
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