August 13, 2015
Buying A Home After Retirement
HSH.com quoted me in Buying A Home After Retirement Is Possible, but Challenging. It reads, in part,
The ideal situation is to enter your retirement years without any monthly mortgage payments. But what if you’ve finally found your dream home at the same time that you’re leaving the working world? What if you’re ready to buy a home in a new city in which you’ve always wanted to live, but you’re approaching your 70th birthday?
The good news is that the federal Equal Credit Opportunity Act law prohibits lenders from denying potential borrowers because of their age. The bad news is that you’ll have a mortgage payment and the burden of caring for a house in your retirement years.
“It can be bad to have a mortgage payment in your 80s,” says Keith Baker, professor of mortgage banking at North Lake College in Irving, Texas. “All sorts of things can happen to you, unfortunately. What if you develop Alzheimer’s? What if your children aren’t financially sophisticated and can’t take over handling your mortgage for you? There are all kinds of reasons not to have a mortgage when you’re that age. But if you can afford a mortgage payment when you’re in your 60s and early 70s and you’re in good health, why not buy that home that you’ve always wanted?”
If you want to buy a home after you’ve retired, you’ll need to first consider several factors, and you’ll need to overcome a variety of hurdles both to qualify for a mortgage loan and to find a home that fits your changing needs as you get older.
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Many borrowers apply for 30-year loans because they generally come with the lowest monthly payments. But such a long-term loan might not make sense for borrowers who are already in their retirement years, says David Reiss, professor of law and research director for the Center for Urban Business Entrepreneurship at Brooklyn Law School in New York City.
“If you are 62, you will not have paid [the loan] off until you are 92,” says Reiss. “Retirees should look at their expected incomes over those 30 years to ensure that they have sufficient income to cover the mortgage over the whole period.”
Income can fluctuate during the retirement years. Maybe payments from a legal settlement run out. You might struggle to find renters for your investment properties. Royalties can dwindle. At the same time, expenses — especially medical ones — might rise.
Reiss says that it makes sense for retirees to take out a loan with a shorter term, such as a 15-year fixed-rate loan, if they can afford the higher monthly payments that come with such loans.| Permalink