Retiring with a mortgage carries serious burdens for some older homeowners looking to retire, but a few options are available to help lessen the load — including a reverse mortgage, a recent LA Times story reports.
The article describes Tom Greco, a 66-year-old attorney whose $4,500 monthly mortgage payments had become “a financial drag.” Like many Americans over the years, Greco wanted to have his mortgage paid off before retiring, but couldn’t make that goal a reality.
In fact, the number of older homeowners facing retirement with a mortgage has grown in the past decade, along with the mortgage debt burden.
Nearly a third of homeowners age 65 and older — or 6.1 million households — had a mortgage in 2011, up from 22%, or 3.8 million households, in 2001, according to the Consumer Financial Protection Bureau (CFPB).
These homeowners owed a median of $79,000 in 2011, compared with an inflation-adjusted $43,400 in 2001. Many older mortgage holders are spending a significant portion of their income on housing costs, with half of those age 65 to 79 spending 30% or more of their income on housing costs, and 61% of those age 80 and older paying that amount, a recent study by Harvard and AARP finds.
Though downsizing, working longer or cutting back on other expenses are some ways to lessen the mortgage debt burden and prepare for retirement, reverse mortgages can also help.
After planning to downsize to a condo, knocking his mortgage payments down by thousands of dollars, Greco hopes to get a reverse mortgage to retire as he wishes. Already eligible at age 66 to take out a reverse mortgage, Greco will be able to tap the equity in his home without making monthly payments on the loan.
Since he’s still working as an attorney, getting a reverse mortgage would “allow him to only take on cases that interest him,” the LA Times writes.
To read the full article, click here.
Written by Emily Study