The last remaining Baby Boomers to retire should be entering their golden years over the next few years. A change we are seeing with Baby Boomer retirees is that they are less likely to retire mortgage-free, compared to the previous generation, according to Fannie Mae.
Fewer Baby Boomers Enter Retirement Mortgage-Free Than Previous Generations
Fannie Mae reports that Baby Boomers are unlikely to enter retirement mortgage-free at the same rate as the past generation.
- “The oldest Boomers, who were aged 65-69 in 2015, were 10 percentage points less likely to own their homes outright than were pre-Boomer homeowners of the same age in 2000.”
- “Boomers achieved free-and-clear homeownership at an accelerated pace during the economic recovery.”
- “However, even with the post-recession acceleration in free-and-clear homeownership, Boomers appear unlikely to attain mortgage-free retirements at the same rate as the predecessor generation.”
Why Aren’t Boomers Paying Off Their Mortgages?
For Baby Boomers who have done well financially, entering retirement with a mortgage may be part of their financial plan. Having a mortgage, therefore, is a financial benefit to them.
For others, living through multiple economic meltdowns, including the tech and housing bubbles that wiped out large portions of retirement funds, may have resulted in the necessity of having a mortgage in retirement.
Boomers also had to deal with education costs rising more quickly than incomes, resulting in higher college costs for their children. And, they are supporting dependent children living at home into their late 20’s because of a poor job market. Boomers have also had to deal with skyrocketing healthcare costs for themselves and their families, which has drained finances which could otherwise be used to pay off a mortgage.
Getting a Mortgage While Retired
There are several options for getting a mortgage while retired.
In general, getting a mortgage while retired works the same way as before retirement. You must show sufficient income, have an acceptable credit score, have a debt-to-income ratio that meets guidelines, etc.
Many retires can even buy a home with a reverse mortgage, and never have to make a payment.
Related: Basics of Getting a Mortgage
Benefits of a Reverse Mortgage
With a reverse mortgage, you can access the equity in your home, which is paid back with the home’s equity. Also, the money you receive from the reverse mortgage is not taxable. Best of all, you get to stay in your home without making payments on the reverse mortgage.
In this video, Mary Catchur with Marimark Mortgage talks about the benefits of a reverse mortgage, and shows you how you can buy a home with a reverse mortgage without making any payments on the loan.
Aim to Retire Mortgage-Free
For most people, it’s helpful to be mortgage-free while retired. If our economy continues to strengthen, and we get the cost of living under control, Boomers may have an opportunity to pay off their mortgage and add to retirement savings.
Some of the best reasons to pay off your mortgage before retirement include:
- Your income is typically lower while retired.
- You will have more cash flow to do other things in retirement, if you don’t have to make a mortgage payment.
- You will save on interest expenses.
- You will have less stress and more peace of mind.
- You can apply for a reverse mortgage to increase your cash flow.
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers and homeowners in all of Florida, Virginia, and Pennsylvania.
We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.
To get started with a mortgage to buy your next home, or to refinance your existing home, please fill out our Quick Mortgage Application, or contact us direct.