Paying off a home used to be celebrated so frequently that “mortgage burning” parties became popular during the mid-20th century. But more recent retirees no longer look at mortgages like they’re bad things.
Although many older Americans have the means to purchase a home outright, a decent number of these seniors are choosing instead to take advantage of the financial benefits that mortgages have to offer. In 2016, almost 14% of homebuyers financed their entire home purchase with a mortgage. Now, seniors may be helping that number grow for 2017.
Many people may wonder whether or not qualifying for a mortgage requires a full time job, but the truth is that the vast majority of banks are willing to let homebuyers borrow so long as there is guaranteed monthly income. Social security, pension, and retirement assets all qualify as monthly income.
Lori A. Trawinski, a senior strategic policy adviser at the AARP’s Public Policy Institute, is no stranger to mortgage burning parties. But she says that they’re now a thing of the past.
“Historically, people would pay off their mortgage in 20 to 30 years and have a mortgage-burning party,” she told the Herald Tribune. “We see that people are [now] carrying mortgage debt at older ages, and it’s both the percentage of families carrying the debt and the amount of debt that has increased.”
But opting for a mortgage after retirement comes with its fair share of challenges.
The 2008 housing crisis resulted in stricter lending policies and regulations, which in turn have created new challenges for those who have been out of the mortgage application process for a while. Now, retirees must jump through additional hoops.
Brian Koss, the executive vice president of the Mortgage Network, a lender based in Danvers, Massachusetts, said that older borrowers should refrain from living in the past.
“After the financial crisis, the regulators rightfully built in ability-to-repay regulations using a spelled-out rule book of how to qualify to ensure monthly payments are made,” Koss said.
Regardless of age or income, though, most experts still recommend mortgage counseling. Considering the tax benefits that come with having a mortgage, this approach may be well worth it for many seniors.