How Will You Pay Your Mortgage in Retirement?
I realized a few years ago that in order to successfully pay off a 30-year mortgage you really need to buy house by age 32. I mean, how many people can afford to continue paying a mortgage in retirement? A friend of mine and I just had an email discussion about this very subject yesterday. So, I have a question: How many of you have mortgages that will continue into your presumed retirement? And how do you plan to deal with it? Sell the house and move? Or what? Our inquiring minds really want to know.
October 15th, 2008 at 9:08 am
[...] retirementwithaplan wrote an interesting post today onHere’s a quick excerptI mean, how many people can afford to continue paying a mortgage in retirement? A friend of mine and I just had an email discussion about this very subject yesterday. So, I have a question: How many of you have mortgages that will … [...]
October 15th, 2008 at 9:43 am
[...] Read the rest of this great post here [...]
October 15th, 2008 at 10:10 am
Ah ha! People are finally starting to wake up, I see. Actually, if you retire by age 70, you’d have to buy a home by age 40, which seems very practical. Gone should be the days where people bought a home with the intention of ’selling up’. I think people need to realize that, just like the survivors of the Great Depression (and all those people of Levitown, NY) you buy one home in your lifetime and plan to stay there till you die. So, much thought has to go into the purchase of that one home: can it be expanded? added on to? shrunken back in size? will it accommodate a growing family and then an empty nest?
You could buy the home with anticipation of selling it and retiring on the equity but we see how that is working out in today’s housing market. No one can project the future. But this I do know: it sure is great to be older and living in a home that is fully paid for. I hear such horror stories of the elderly being tossed out of their apartments, rentals, etc. At least, if you own your home, you can stay there in peace. Also, there are many tax benefits to home owners over the age of 65, such as tax reductions and home repair services. Also, reverse mortgages (which I don’t recommend-loaded with fees) are becoming popular but only to those homeowners who do not have a mortgage and are over the age of 62)
My rule of thumb was to buy a home at age 30, which I did with a 25 year mortgage. There are also 20 and 15 year mortgages. That meant that I would be mortgage free by age 55 and with my remaining work years I would sock away money into my retirement portfolio. My luck ran better. I was able to sell my home at age 50 and cash in my untouched equity and build another home mortgage free. So, I am five years ahead of my own planning. DH and I plan on living here forever and when the times comes when DH can no longer do most of the maintenance, we will hire locals (mow lawn, shovel snow etc.) or pray a boogie dance that one of my daughters marries a handyman but that is neither here nor there. LOL
When we turn 65 we can apply for a reduction in our property taxes. Also, more and more retirees are moving up into our area so more and more senior programs are becoming available. Like adult ed at the local college, senior citizen day care, adult socials at the local libraries, better health care and medical programs….it goes on and on. There is even a proposal to build a 62 apartment/condo complex for those 55 and older who want to downsize. The building will be right in town and will offer easy access to town activities. DH and I are thinking about that. We’ll see.
October 15th, 2008 at 10:18 am
So simple! Only buy a house you can afford with a fixed rate 15-year mortgage starting no later than 50–or cash. If millions more people had done this, we wouldn’t be where we are today.
October 15th, 2008 at 10:19 am
Well, I DID buy a house at age 32, and when we refinanced 10 years later we got a 20-yr mortgage since I don’t plan on paying a mortgage in my 70’s. However, if we do move I may end up having to unless we get enough of a downpayment from sales of our house. But for now we’re staying where we are until we have done enough to make the house in sellable condition (and the market turns around).
October 15th, 2008 at 11:38 am
We got a 20-year-mortgage, which will be paid off when the second kid goes to college. Here’s hoping the first one gets lots of scholarships. But even so, we’ll have to work till we die because our retirement accounts are not high.
October 15th, 2008 at 12:13 pm
I purchased my house in October 1979 at age 31. I’m paying it off a year early (next month). I never refinanced, never had a home equity LOC or Loan. I do worry about keeping up with the taxes after retirement, as the escrow is now 4 times larger than when I purchased.
The good news is that I can work until I’m 70 if my health holds up!
October 15th, 2008 at 5:19 pm
We’ve lived in our home almost 25 years and did all the things you’re not supposed to do, refinance for example, more than once. My husband retired last week and we’ll probably sell our home and move (downsize) in the next 3-4 years. We’re exploring cheaper places in the country we’d like to live.
October 15th, 2008 at 6:46 pm
One of my friends paid off her mortgage at age 62 and had a party. Even though she has little income, at least she won’t be thrown out of her house.
We inherited a house and were able to sell it to pay off our mortgage. Has that happened to anyone else?
October 15th, 2008 at 8:57 pm
Two friends who are my age (50 something) have paid off their houses. One bought in his 20s, the other paid extra to principal. I, on the other hand, refinanced last year and reset the clock to 30; I’ll be in my 80s with this mortgage. There is no way I’ll be able to pay it in retirement. I’m screwed. I’ll have to sell and move somewhere else to see the benefit of increased home values.
October 15th, 2008 at 11:08 pm
We bought the smallest house we thought we could live in comfortably. This is our 2nd house (we paid cash for the 1st house which was a beater in the Missouri Ozarks) and we used nearly all the money we got from the sale of the 1st house as a down payment.
We refinanced once, but not to take out any equity. We got a better interest rate and then I began paying an additional $1,000 per month against the loan. At that time our payments were about $1,800 per month and this was a 15-year loan. I was on track to pay off the house before retirement, but when my mother died 2 years ago and left me a small amount of money, I used that to pay off the mortgage. We ended up having a mortgage for only 8 years.
So at 55, I own the home outright, but now there are no jobs here and the house has lost some value. So do we stay here and hope some jobs open up, or do we sell at a perceived loss and try to find work elsewhere?
Nothing is ever as simple as it seems!!
October 16th, 2008 at 4:15 am
We had our former Denver house paid off before we sold it and bought a new one here in north Florida. We put a LOT down on the new house, and fortunately, one kid is out of college and the other has a good scholarship.
But yeah, retirement is a lo-o-ng ways off, and those property taxes can kill ya. The future is very murky.
October 16th, 2008 at 8:10 am
My husband and I, both in our 50’s, just bought a house 3 years ago. We have a fixed rate at 30 years. We were offered to split our payment in half and pay twice monthly, which also pays the house off in 20 years. We plan to sock at least one full payment extra a year to the principle and should have it paid off by the time we actually retire. That’s if we decide to keep the house. Even if the house is paid for there is always the upkeep and TAXES that continue on. I want as much freedom in my later years as I can get and a house can become quite a burden. The one good thing about renting is all you have to do is call the landlord when something goes wrong and there is no yard to mow and water…..bonus!
October 16th, 2008 at 8:12 am
Thanks, everyone, for explaining your real estate situations in detail. I appreciate your honesty and openness because it helps everyone to hear each other’s stories.
October 16th, 2008 at 9:50 am
Our house will be paid off before we retire, due to a windfall we got a during the dot-com bubble which we applied to principal. We haven’t talked about our plans yet, but I’d imagine we’d sell it and move to a smaller/cheaper place. It had better be quite a bit smaller to go with our 401k.
October 16th, 2008 at 10:27 am
Simple… Put enough down, and buy something within your means so that your monthly mortgage is less than the average monthly rent in your area. And, should you have to sell due to the need for less upkeep, buy a condo where much of the work is done by others.
October 16th, 2008 at 1:44 pm
I’m 50 and have been renting my whole life and shall obviously continue to do so – unless I manage to find a ridiculous amount of money somewhere. Needless to say, I am not holding my breath!
October 17th, 2008 at 5:20 am
Both my husband and I owned before getting married. We bought this house on a 15 year mortgage. It isn’t that much more per month to get the shorter loan (relatively speaking), though if you are budgeting on a shoestring, it would be hard.
October 17th, 2008 at 10:39 am
The 15 year mortgage IS the answer. I bought my first home on a 30 year mortgage when I was 27. Ilived there (and reared two of my kids there) for the next 15 years. Then I rented it out and moved to the big city. After two years of apartment living, I bought my current residence in 1993 (when I was 44) with a 30 year mortgage which I refinanced in 1999 to a lower interest rate and a 15 year mortgage. That transaction raised my monthly payments by only $46 a month. Now, my first home is free and clear. My current residence will be the same in the month in which I turn 65. I don’t know if I will keep it or not–I love it, but it’s huge. I needed the space for my next three kids, but now that they are all adults, I may need to rethink my living situation.
October 18th, 2008 at 10:43 am
A mortgage into retirement is awful. But there is something else that can be just as bad and still be a monthly note. I am talking about your electric bill. Mine has increased over the years even after kids have grown and left. Pull out all your old electric bills over the years and you will see a slow and steady increase.
What was your electric bill 10 or 20 years ago? What do you think your electric bill will be like by the time you retire in 10 or 20 years from now? If it keeps at the presently increasing rate, your electric bill may take the place of a mortgage note. That is a shocking statistic.
You prepare for retirement by getting rid of a mortgage note and saving money. How are you preparing for your future-high electric bill? Do you save for it? Or do you find alternative energy?
October 21st, 2008 at 9:54 am
As many others have mentioned, we did the 15 year mortage thing about 10 years ago. Five more years of mortgage payments, then five more years of working and stashing away every penny we can before retirement. Husband has a decent pension plan and we have always put away savings for a retirement fund. Stocks took a hit last week, but it worked out well for us, as we took out a stock loan when stocks were high to pay cash for our cars (which we plan on using right through retirement!), so we’re buying stock back now at this lower rate. Whew. The closer we get to retirement, the more scarey it is!