why have a mortgage during retirement

Why have a mortgage during retirement?

Baby boomers are getting older. They are retiring and staying home more and more. Television ads with your old favs Tom Selleck, Henry Winkler and Robert Wagner come and trying to convince you to consider a reverse mortgage. This is where you basically sell your home to the bank and they let you live there until you and your spouse pass. But there are some seniors who are resisting these enticing ads and opting to carry a mortgage with payments on their home.

Some seniors will choose to downsize into a smaller home, selling their larger home and getting a nice equity cash out where they can pay for the new home with cash. Some seniors will do a cash-out refinance which will require them to continue making monthly payments.

Current low mortgage rates can be the motivating factor behind either of these examples. The owners can reinvest the money at a higher yield and make money on their equity. This will give them more money for their retirement income.

Then there is the question, “Are seniors able to qualify for new mortgages since they are no longer employed?” The Equal Credit Opportunity Act prohibits discrimination against borrowers based on age.

All borrowers, whether they are working or not, whether they are seniors or not, need to show that they have good credit, reasonable debt ceiling and enough stable income to repay the mortgage. ​Lenders cannot base their decision on loan term based on an applicant’s life expectancy, so a 30-year loan is possible regardless of the borrower’s age.

Fannie Mae, one of the largest purchaser of mortgages on the secondary market, is concerned on income that is stable, predictable and likely to continue.  Senior retirees’ income can come from Social Security, pensions, or distributions from retirement accounts like IRAs, 401(k)s, Keogh or other plans.  Lenders will analyze these sources to estimate how long it will last.

Other investments can be considered like stocks, bonds, mutual funds and annuities.  Based on the type and the volatility of the investment, lenders may be restricted from considering 100% of the income.

Getting the facts to know if you are eligible and how much you can borrow is important as it pertains to you as an individual or a retired senior.  I can put you in contact with a trusted mortgage professional who understands your type of borrower to help you determine the right mortgage vehicle and provide information to decide if this option is right for you.  Call me at (703) 303-4010 if you would like a recommendation.

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