While paying off your mortgage before you retire is ideal, it may not be feasible in some cases.
Now, dealing with a mortgage during your retirement years is not the best-case scenario, but it doesn’t have to be a serious cause for concern if you can still pay for all of your monthly expenses.
Taking out a mortgage during your twilight years can have its benefits. For example, it may allow you to purchase a more retirement-appropriate home.
Can I Retire if I Still Have a Mortgage?
You can still qualify for a mortgage as a retired person, provided you can provide your lender with sufficient proof that you are still earning an income that can manage the mortgage’s payments.
De facto, taking out a mortgage while retired may allow you to access an additional income stream by reinvesting the equity that you have accumulated from your property.
Should You Pay Off Your Mortgage Before You Retire?
While dealing with a mortgage while retired may have some benefits, the general rule of thumb is to try to own your home by the time you have retired. Making additional payments may help you pay off your mortgage ahead of schedule.
However, ensure that your lender will not charge you any early payment fees. Or, try and make an extra payment every three months if you cannot make an additional payment each month.
Quarterly payments may not seem significant, but they can remove up to a decade from your payoff date. Moreover, refinancing from a thirty-year loan to a fifteen-year loan will also allow you to pay off your mortgage much faster, and possibly before you decide to retire.
Also, while mortgage interest is usually tax-deductible, you need to itemize it to take advantage of the break.
Many retired people who still have a mortgage to pay off may be forced to tap into their retirement funds to make ends meet. The withdrawals that they make could trigger additional taxes, which will make an already delicate situation even worse.
You can have more peace of mind and enjoy your twilight years with more disposable income by paying off your mortgage early.
You can also sell your home and move into a retirement community, using the profits generated from the sale of your home to go on multiple trips, pay off your remaining debts, or purchase the boat or car of your dreams. You can also use the proceeds to move into a smaller, more affordable home.
What to Do If You Can’t Pay Your Mortgage
The first thing you should do is speak to a financial advisor to get advice. They will help you calculate what you can and cannot afford, helping identify unnecessary expenses you can cut and different ways you can lower taxes and increase your savings.
For example, you can cancel your cable subscription or take public transit to save on gas and auto insurance. You should also check to see if you have mortgage insurance and should try to find ways to increase your income.
You can also try to start a new business, open a new store or restaurant, or take on odd jobs for your neighbours and/or family.
You can also try to negotiate new terms with your lender.
They may be willing to lower your interest rate and monthly payments if they believe that they will still get a respectable return on their investment.
If all else fails, then you may want to look into actually selling your property to pay off your outstanding debts. In fact, if you get a cash-out refinance, you can use the extra money given to you to renovate your home, so you can sell it at a higher price and get more money than you would have without the renovations.
Speak to an advisor or broker if finding the best mortgage rate possible is a top priority for you. It can help reduce your monthly expenses and make your mortgage manageable.
How to Handle a Mortgage While You’re Retired
You may want to consider recasting your mortgage. Try to keep tabs on your budget to ensure that you do not spend beyond your means. Moreover, you may want to consider downsizing, especially if your children have left the nest or if you are widowed.
You also need to evaluate whether or not your current home is the best fit for your lifestyle during your golden years. Refinancing is also something to look into if you can get a lower interest rate that is more manageable with your pension or other retirement funds.
Switching to biweekly payments will save you thousands of dollars in interest charges over your loan term and may shave a few years off your term.
Can You Qualify For a Mortgage After Retirement?
Yes, purchasing a home, condo, or apartment is possible after retiring. Regarding the best types of mortgage refinancing for seniors, most experts recommend a reverse mortgage, a home equity line of credit, or refinancing.
Sources:
Mortgage financing options for people 55+ | CMHC (cmhc-schl.gc.ca)
Should You Pay Off Your Mortgage Before You Retire? – NerdWallet
How to Pay Off Your Mortgage Before Retirement | John Hancock
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