Americans have historically been free of mortgage payments by the time they reach retirement age, but the past two decades have seen an increase in the number of seniors making house payments post-retirement, reports a Detroit News article.
While lack of monetary funds is the cause for some seniors still making mortgage payments, financial planners say some Americans are opting to put their money in higher yield investments and continue to make smaller house payments into their retired years, reports the article. Refinancining is another option gaining popularity among seniors, as they see it as a way capitalize on low interest rates and keep from digging into their retirement funds.
Detroit News reports:
It’s part of a trend: Many current and future retirees are opting not to follow the traditional golden rule of paying off their home before their last day at work so they will have fewer expenses in retirement.
“It’s a very hot topic,” said Howard Dvorkin, founder of the Fort Lauderdale-based Consolidated Credit Counseling Services, which is now seeing more seniors grappling with large debt loads, including mortgages. In the past two decades, seniors have increasingly retired while still making house payments, Dvorkin said.
In fact, financial planner Anderson Wozny, whose firm has offices in Boca Raton, Fla., and Miami, recommends retiree clients keep making their monthly payments. “A mortgage is a valuable tool,” he said, allowing retirees to keep cash on hand to pay for home repairs and other emergencies.
Some seniors feel they have no choice but to refinance as they lost jobs during the Great Recession. Refinancing helps keeps them from having to dip into retirement savings.
Karen Sutliffe went on Social Security early after she lost her job and couldn’t find a new one. Now she’s trying to refinance her Oakland Park, Fla., home, which is worth less than the mortgage. Lower monthly payments would keep her from furthering dipping into retirement savings, she said. Getting a reverse mortgage isn’t an option, Sutliffe added, because she and her husband owe about $50,000 more than the home’s value.
“People become concerned about cash flow,” said William B. Stronge, an economics professor emeritus at Florida Atlantic University who has about six years more to pay on his mortgage. It makes better economic sense, Stronge said, to keep paying on the mortgage to avoid credit card debt.
Read the full Detroit News article here.
Written by Erin Hegarty