Many people aim to retire without a mortgage. In fact, some borrowers speed up their repayment period for the express purpose of being able to start their old age without a mortgage.
Retirees generally live on a fixed income which largely consists of social security. And for this reason, many aim to avoid going into debt as much as possible. This way, they won’t have to worry about nagging payments as they try to stretch their limited income as much as possible.
But in some cases, getting a mortgage during retirement might make sense. Here’s what you need to know if you’re considering applying for a home loan during your retirement.
6 simple tips to get a 1.75% mortgage rate
Secure access to The Ascent’s free guide that reveals how to get the lowest mortgage rate on your new home purchase or when refinancing. Rates are still at their lowest for decades, so act today to avoid missing out.
By submitting your email address, you consent to our sending you money advice as well as products and services which we believe may be of interest to you. You can unsubscribe anytime. Please read our privacy statement and terms and conditions.
The benefits of getting a mortgage in retirement
Perhaps you have spent the latter part of your career renting a home and are now looking to own one in retirement. Or maybe you actually made pay off your house in time for retirement, but now you want to downsize and are considering taking out a mortgage even if you can afford a smaller house.
In these situations, it may be worth getting a mortgage for several reasons. First, borrowing is extremely cheap right now. As of this writing, the 30-year average mortgage is around 3.1%, while the 15-year average is less than 2.4%.
Of course, the mortgage rate you qualify for will depend on a variety of factors, including your credit rating and how much debt you have relative to your income. But if you are able to get a competitive interest rate on a mortgage, you may decide that you would rather borrow money for a house and make monthly payments during retirement, while still leaving yourself with more. money in the bank in an emergency.
In addition, it might be wise to detail your retirement income tax return. And if you’re going to itemize rather than claim the standard deduction, the ability to deduct the interest you pay on your mortgage could result in higher tax relief.
Which is the right choice for you?
When you take out a mortgage, you take on debt. He might be a healthy guy to have, but it’s still debt. And if you fall behind on that debt, it could damage your credit score and cause you a world of financial stress. Plus, a late mortgage payment could put you at risk of losing your home.
Also, for some people, the idea of ââbeing in debt is unattractive. And this could be especially true for you in retirement, especially if you will be living primarily on a limited source of income like Social Security.
But if you’re comfortable with having a mortgage to cover and can afford to make those payments, then getting a home loan during retirement is an idea worth considering. Getting a mortgage could save you the hassle of emptying your bank account to buy a home. And you can even get a good tax break as part of the deal.