Research shows that most retirees are better off paying off their mortgage before retirement. One notable exception, however, would be higher-net-worth individuals, who may be able to use debt to their advantage , even throughout retirement. You can have as many mortgages as lenders are willing to give you.
The more mortgages you have, the more difficult it will be to find a lender for a new mortgage. Current interest rates are around 2. Check Freddie Mac's mortgage rates page for the most recent data. Directions Credit Union. Freddie Mac. Consumer Financial Protection Bureau. Quicken Loans. Minnesota Attorney General's Office. Century Should You? Union Bank. Accessed April 28, Department of Veterans Affairs.
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Develop and improve products. The type of property you want to finance may also impact your ability to qualify for a mortgage after retirement. Alternatively, a secondary home—like a summer house—may be more difficult to finance if you already have an existing mortgage on your primary home. When researching lenders, also ask about any additional expenses like mortgage insurance and discount points that could get rolled into your loan balance.
Preapproval can also shorten the application and final approval process because you already have easy access to documentation of personal details like your credit score, income and assets. Down payment options for retirees are more diverse than for traditional mortgages. Retirees can also make a traditional down payment by pulling cash from an IRA or other tax-deferred retirement account—but these withdrawals are treated as taxable income.
If you struggle to qualify for a traditional mortgage, you may be able to take out a loan against your non-retirement brokerage account if you have one. Keep in mind, however, that this financing structure typically comes with abbreviated loan terms often as few as five years and higher interest rates than mortgages. Ideally, you should not have a mortgage in retirement. This is because large monthly mortgage payments are more difficult to cover in the absence of steady, reliable income.
Oftentimes, retirees are forced to make withdrawals from their retirement funds to cover mortgage payments rather than saving that money for necessary living expenses down the line.
That said, paying off your mortgage before retiring may not always be possible—or wise. For example, using a large portion of your savings, retirement funds or other investments can leave you without an emergency fund. Likewise, making large withdrawals from certain investment accounts can lead to costly tax implications and penalties, and may cost you more in the long run.
You may also be able to earn a higher rate of return on your money by keeping it invested, rather than using it to pay off your mortgage. For that reason, we recommend consulting with a financial advisor before committing to a mortgage or using retirement assets as a down payment. Kiah Treece is a licensed attorney and small business owner with experience in real estate and financing.
Her focus is on demystifying debt to help individuals and business owners take control of their finances. She has won several national and state awards for uncovering employee discrimination at a government agency, and how the financial crisis impacted Florida banking and immigration. Select Region. United States. United Kingdom. Kiah Treece, Rachel Witkowski. Contributor, Editor. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations.
Alternatively, you can rely on your retirement or other assets to establish a monthly income using one of two methods: Drawdown on retirement. With certain RIO deals, you may be able to also pay off a percentage of the actual mortgage as well as the interest.
Check with your lender to understand your options. For impartial financial advice, we recommend government bodies like the MoneyHelper. What is an agreement in principle? You can talk to us over the phone or use our mortgage video service from the comfort of your own home. Lloyds Bank plc. Registered in England and Wales No. Lloyds Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number Telephone calls may be monitored or recorded in case we need to check we have carried out your instructions correctly and to help us improve our quality of service.
Getting a mortgage when you're retired. Who is this page for? In this article.
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