Fewer Seniors Paying Off Mortgage DebtOctober 25, 2018
New research has shown that fewer seniors are paying off mortgage debt these days. In fact, homeowners over the age of 60 were “three times more likely to have a mortgage in 2015 than they were in 1980.” Many fear that this rise of seniors carrying mortgages will have repercussions on the baby boomer generation’s financial health. Additionally, people are curious as to how this will affect Americans that will be retiring soon. According to recent research, the reasons for this trend aren’t what you might expect:
Advice from Financial Planners
Financial planners have expressed the benefits of having a mortgage in retirement planning. The researchers state, “Since mortgage interest rates are often a low-cost form of borrowing, households can leverage their portfolios by arbitraging the difference between the costs of borrowing and real rates of return when investing in markets.”
However, one must consider the extent to which seniors will typically be able to pull this off.
The Tax Benefits
At the federal level and in many states, mortgage interest is deductible from income taxes. As a result, seniors are spending less money to keep their homes around, which seems like a better option than selling and moving into a retirement home or apartment.
There are some seniors who may not have a pension, such as those coming from a low-income or lower class family. As a result, they have found an alternative option for generating wealth in the form of home equity.
Owning Over Renting
More and more seniors are opting to own homes rather than rent. They seem to prefer the sense of security and control that comes with owning a home.
Not Stressing Over the Debt
While an ample number of people have expressed their concerns over this increasingly popular trend of carrying debt into retirement, seniors do not seem phased by it. To illustrate, seniors “have been holding on to their homes, extending the terms of their mortgages to potentially smooth consumption and access more liquid savings, or refinancing to access equity.” As of now, there don’t seem to be any consequences from this, but continued research will be necessary.
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