With the increasing debt facing many Boomers today, it may be wise to consider other options besides a mortgage in retirement.
Is getting a mortgage in retirement the best idea for you? Delaware real estate broker, Kathy Sperl-Bell of Active Adults Realty discusses the realities of mortgage debt for today’s Boomers and the options they have.
Can I get a mortgage in retirement? Should I? Hi. This is Kathy Sperl-Bell of Active Adults Reality in Delaware, and should you get a mortgage in retirement?
Earlier this year, we spoke with Pete Green from Atlantic Bay Mortgage here in Rehoboth, and basically the answer is yes. You can get a mortgage as long as your income and expenses allow you to qualify. But should you get a mortgage, and if so, how large a mortgage should you take on? There is just so much in the press today about the growing number of baby boomers filing for bankruptcy. Obviously, the increasing debt has to do with healthcare costs and it also has to do with mortgage debt.
Some of the statistics say that roughly 41% of senior debt in 2016 was from mortgage debt, and that’s nearly double the rate of 21% back in 1989. The out of pocket healthcare expenses are now up to 41% of the average social security payment. Those are two rather scary statistics. And yet, many retirees are buying their retirement homes with an 80/20 mortgage, and some with even less than 20% down. What are we going to do?
There are options. One of them is to pay cash. Buy a home you can afford and pay cash for the home. But who do you actually go to for advice? If you go to your mortgage people, they’re going to say, well, of course you should get a mortgage because mortgage interest is deductible, and if you go to your investment people, they’re going to say, well, of course you should get a mortgage and just leave your investment funds right here with me because that’s how they make money, don’t they? By managing your investment account.
But if you pay cash for your home, you’re going to have that home to live in for the rest of your life, and you can get the peace of mind knowing that if you need to tap into that equity, you can in a couple of different ways. Here’s the easy one. The easy one is once you’ve settled in your new home, you go to a local bank and apply for a home equity line of credit, a HELOC. Don’t actually take the money, just get the approval for the home equity line of credit so that it’s there in case you need it. There’s no application fee, and at WSFS Bank here in Delaware, it’s $50 a year to keep that line of credit open and available to you in case you need it in an emergency.
Another possibility is to tap into the equity using a home equity conversion mortgage, otherwise known as a reverse mortgage. Now there is an application fee. It’s actually applying for a mortgage. However, if you do a HECM, you will no longer have a mortgage payment and you will have the equity to make your living more comfortable. So two ways to pay cash, but set yourself up in a situation that if the need arises, you can go back and tap into the equity of your home.
Our goal is to help you buy a home that you’re going to be comfortable in for the rest of your life, and anything that we can do to help you think through what’s going to work best for you, let us know.
Do you have a Delaware or real estate related question? We want to hear from you! Please leave us a comment below or submit your questions directly by visiting HERE. or you can email Kathy at Broker@ActiveAdultsRealty.com. You can be featured in our Ask The Broker series!