As my husband and I inch closer to retirement, we know we have to make serious decisions about our housing situation. We have one last chance to buy a step-up home that can be paid off before we retire as long as we choose a 15-year mortgage. We are want to be mortgage free by the time we retire, we no longer have the luxury to take out a new 30-year mortgage or even refinance to a 30-year term loan. According to a recent article by Wall St. Cheat Sheet, a record number of senior citizens have mortgage debt. The article cited a report by the Consumer Financial Protection Bureau which shows 30 percent of seniors had mortgage debt in 2011 compared to 22 percent 10 years earlier. My husband and I sat down and examined our options since we are in our 40s.
Refinancing one last time
Although we have already refinanced our home twice, there is nothing stopping us from refinancing to a 15-year mortgage. We could lower our monthly payment. At this point, our mortgage will be paid off by the time my husband is 58. Since his full retirement age is 67, we could refinance anytime between now and his 52nd birthday as long as we choose a 15-year loan. If we wait until he’s in his early 50s, we can’t be sure the mortgage rates will still be as low as they are now.
Buying a step-up home
It’s also our last chance to buy a step-up home is we want to time our mortgage payoff so it coincides with our planned retirement date. A few of the mortgage lenders actually offer flexible mortgage terms that allow a person to take out a 20-year mortgage instead of the traditional 15 or 30-year loan. We’d have to decide within the next two years whether we want to buy a step-up home with a 20-year loan. Our bank said we could qualify for a $250,000 home loan with a 20-year term. We’d have to sell our current home, though, for full price.
Retiring in place
Our third option is to retire in place. If we kept our current mortgage, we will have it paid off in another 13 years. My husband would be 58 years old when our mortgage is completely paid off unless we pay extra toward the principal each month. If he retires at age 67, we’d have 9 years of no mortgage debt. We could more easily afford catch-up contributions toward our retirement plans.
In order to avoid debt in retirement, we also want plan to avoid taking out second mortgages or home equity lines of credit. Paying down our mortgage will make it easier for us to build our net worth. According to Wall St. Cheat Sheet, senior citizens run the risk of losing their homes in retirement. Between 2007 and 2011, five times more older homeowners became seriously delinquent in paying their loans. I can’t think of a worst stage in life to lose a home to foreclosure. By being happy with what we have now, I think we have a better chance of being mortgage free by the time we are retired. Our decision is to stay put so we have the option to retire early and still be free of a mortgage.
More from this contributor:
Paying Extra on Our Mortgage Put us Deeper in Debt
I’m Not Resorting to a Reverse Mortgage
Paying off Our Home 10 Years Early