As the number of seniors retiring with mortgage debt increases, so does the potential financial burden of making regular monthly mortgage payments. Inflation and rising costs of living could overwhelm those living on fixed incomes, according to an article published this week. USA Today.
“Retirement researchers warn that mortgage debt in retirement can be a trap,” the article explains.
According to data from the Consumer Finance Survey United States Federal ReserveThe share of Americans 75 and older with mortgage debt has increased from 5% in 1995 to 25% in 2022.
The amount these homeowners owed on their mortgage also rose significantly, from a median of $14,000 to $102,000 during the same period.
Increases in home values often make older homeowners better off overall financially, but if the majority of one’s net worth is tied to the illiquid assets of their home equity, the presence of a regular mortgage loan may not make older homeowners feel better off. Better.
A study published in 2023 Michigan Center for Retirement and Disability Research USA Today cited a University of Michigan study that found the “typical” retiree often does not have enough financial resources or assets to repay mortgage debt.
“Researchers found that retirees with larger mortgages face greater financial risks. Households with more mortgage debt tend to delay retirement and spend less money in retirement,” the media said. “They also tend to sell their homes earlier than retirees with smaller or no mortgages.”
Experts have suggested a variety of reasons for these changes. Homebuyers as a group are getting older, according to 2023 data national association of realtors (NAR) shows that the average age of first-time homebuyers last year was 35, while the average age of repeat buyers was 58.
In terms of potential solutions, one suggestion is the common route of downsizing – selling your existing home and using the sale proceeds to move into a smaller home. But USA Today also mentioned the possibility of using a reverse mortgage.
“This is a type of loan that allows homeowners to tap into equity using their home as collateral,” the outlet said. “The loan typically matures when the owner dies, moves, or sells.”
The University of Michigan study “begs the question, what about reverse mortgages? Why aren’t they a logical part of the solution?” J. Mark Iwry, nonresident senior fellow Brookings Institutiontold USA Today.
The outlet was offered a possible answer: the reputation issues the industry has had for years. USA Today also cited some of its own reporting in 2019 that targeted certain players in the reverse mortgage industry. It paints a bleak picture of the industry’s practices, some of which are challenged by other subject authorities.
USA Today conducted some additional investigative work in 2019 on the practices of the reverse mortgage industry and published an op-ed on the topic written by a leader of the industry’s leading trade group.
