More and more older Americans are carrying mortgage debt than ever before. This not only delays their retirement, but also slows spending habits among these baby boomers.
According to date from the Consumer Financial Protection Bureau, almost a third of homeowners over the age of 65 had a mortgage, up from 22% in 2001. Their debts also grew; owing a median of $79,000 in 2011, in contrast to a decade earlier where (inflation-adjusted), the debt average was $43,400.
Why is this trend? Well, for decades prior, homeowners worked hard to pay off mortgages by retirement. But now, the boomers purchased homes later in life, and with smaller down payments than earlier generations. Factor in refinancing transactions and equity withdraws to pay off other debt, put children through college or take vacations and the result has been boomers with mortgage debt.
The recession was also a factor. Many baby boomers helped adult children by moving them into their homes; aiding financially and ultimately losing their financial gain. The number of households owned by someone over age 65 who hold a mortgage rose from 3.8 million in 2001 to 6.1 million just ten years later. In fact, a recent study showed that people ages 65 to 79 who hold a mortgage spend nearly 30% or more of their income on housing costs. Mortgage owners over the age of 80 spend 61% of that amount on housing.
All of this, coupled with rising healthcare costs, gives foreclosure risks a nudge. Many boomers are also facing downsizing, or returning to the workforce to prevent foreclosure.
In addition, reverse mortgages are also being utilized, which allow people who are at least age 62 to receive payments based upon their home equity. But, a reverse mortgage does not require monthly payments, rather the loan does not come due until the home is sold or the borrow moves out or dies.
These market trends should be considered by anyone looking to buy a home.
Rowland Title Company 