At 65, will you still have a mortgage hanging over your head? Are you a Boomer over 50 who will still be making mortgage payments once you reach normal retirement age? If so, you’ll be like 35% of other senior homeowners, according to the Canadian Association Of Accredited Mortgage Professionals. As a senior, a mortgage obligation can take money away from the resources you need to carry you through the remainder of your life. Unless you are willing to cut expenses, you could be in trouble.
Why Seniors May Still Have Mortgages
With the 25-year mortgage common, you might be in that situation if you took out a mortgage past the age of 40. You may have become a homeowner later in life, but many seniors are still paying mortgages because they refinanced their homes at an earlier time to pay for a wedding or a loan to their kids for a down payment or some other purpose. Your thinking might have been that the kids would inherit the money anyway, so they might as well have it when they need it.
The Trade-off For Having A Mortgage In Retirement
This generosity makes some sense, but the great risk is that it will tap into monies that seniors need to live on. With people living longer, the average senior will need to keep working into retirement, cut expenses, and not take on a new debt areas to make it. In contrast, according to Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada, Inc., many seniors are not changing their spending habits to match their coming reality. Seniors are both adding new debt and taking on new mortgages which could put them in trouble if interest rates rise and the payments follow. “It could send them into a tailspin,” says Schwartz.
How Do Your Finances Line Up?
During your retirement years, what does your financial picture look like? If you are thinking of taking out a new mortgage or even if you find yourself holding a mortgage or considerable debt, you need to ask yourself some hard questions:
- How far into your retirement does or will your mortgage extend?
- How far into retirement are you planning to work?
- How much debt do you have and how do you plan to extinguish it?
- Are you making it every month or feeling squeezed?
- Are you prepared to cut your spending so you can both pay off your debt and save for the future?
- Do you have any other assets you could extinguish to reduce your debt or monthly living expenses?
- Whether you are paying house or only it out right, can you still afford the extra expenses associated with homeownership, such as taxes, landscaping, repair, and maintenance?
The answers to these questions might influence your housing plans in your retirement years. Your concern should be to have the resources to hold you through the rest of your life.
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|Roy Thomas SRES® (Senior’s Real Estate Specialist) is a REALTOR® with Sutton Group Professional Realty. Since 1991 Roy specializes in helping retirees with their later in life real estate transactions. If you are contemplating a move and would like a complimentary copy of Roy’s guide to downsizing entitled “Preparing to Downsize” please click here|