But Is It Worth The Risk?
You’re retired and your home no longer serves your needs. Your mortgage is paid off but your house is older and in need of repair. You want to move to a new neighborhood where property values are higher. A neighborhood that caters to seniors. The sale of your home will cover the majority of the purchase but not all. You need to know your options. You need to know whether a new mortgage after retirement is possible and even worth it. Read on to learn more about the risks of a new mortgage after retirement and ways to lower your risk.
Your home is one of your biggest assets. As a retired senior, you have equity in your home. Your kids are on their own and you need to downsize. Your neighborhood is safe but you’re looking for a senior-friendly neighborhood. You’re not quite sure whether you want to age-in-place or move to a newer home. The upside of moving is maintenance-free living and a senior-friendly environment with activities and amenities that fit your aging lifestyle. The downside is the cost. While your equity will cover some of the expense, you’re concerned you’ll need a mortgage. On a fixed income, you’re not sure whether you can afford a new mortgage after retirement or if you can even get one.
Let’s first discuss the possibility of securing a new mortgage after retirement. The answer is yes, a new mortgage after retirement is possible. Lenders cannot discriminate by age. In fact, if you qualify, you can secure a new mortgage for 15 or 30 years at any age.
Securing a mortgage is no different before or after retirement. The process is the same-gather your important financial documents, know your current credit score, clean up credit problems, and talk with a lender to see how much of a mortgage and payments you can afford. The steps are simple, but the decision to secure a new mortgage after retirement is not. There are more risks to consider as a senior in retirement than in your younger years.
Risks of Securing a New Mortgage after Retirement
Cash Flow. The first risk to consider is how your new mortgage will affect your cash flow. Regardless of whether you work part-time or you are on a fixed income, your cash flow is important. A new mortgage or debt of any kind will impact your cash flow. Reduce your risk by working with your financial planner to evaluate your current sources of income. Consider all sources including Social Security, pensions, and investments such as capital gains or rental property. Ask your financial planner to review cash flow scenarios using different price points for mortgages, interest rates, and taxes. One scenario to consider is aging-in-place. You may consider a home equity loan a better choice to remodel or repair your home instead of moving.
Health. It is no secret that health and outliving retirement money are equally important to seniors. Even if your cash flow will support your new mortgage, you want to evaluate your current health to make sure you can continue making the payments for the duration of the loan. You also want to consider the health of your spouse or anyone on the loan. Depending on your situation, you may even need to plan for premature illness or death. While death is difficult to predict, you need to plan for your spouse to meet the mortgage obligation if something happens. One way to reduce this risk is to purchase a mortgage term life insurance policy. Mortgage term life insurance may be costly. Shop around for best rates.
Extra Expenses. Property taxes, inflation, and interest rates are extra expenses that can erode your cash flow with a new mortgage. Work with your Senior Real Estate Specialist© who understands your market and refers to senior-friendly lenders.
Mortgage Scams. The Federal Trade Commission (FTC) warns about mortgage scams. Common scams for seniors include deceptive mortgage advertising, and mortgage relief and reverse mortgage scams. Relying on a Certified Senior Advisor© before you secure a mortgage can help you avoid these scams.
There is a lot to consider about securing a new mortgage after retirement. Cash flow, health, extra expenses, and scams are several of the risks seniors need to consider with a new mortgage. The best recommendation is to talk to professionals before signing a contract. Relying on professionals such as a financial planner, Senior Real Estate Specialist©, and Mortgage Lender or Broker is wise to reduce risks that may come with a new mortgage after retirement.
For more tips on real estate, aging-in-place, and not outliving your money, request a copy of our free book, The Northwest Indiana Guide for Seniors.