22 Oct Mortgages threaten retirement security
The lending industry’s effort to get us to see our homes as a liquid asset, available to fund current wants, obscures the effect of that mortgage loan at retirement.
A family who “taps the equity” in their home for cash typically buys into 25-30 years of mortgage payments. Take out that loan at age 45 and you will be making mortgage payments until you are 75. That’s a far cry from the traditional concept of being able to burn the mortgage when your home is paid off and being free of mortgage payments.
Few retirement budgets contemplate continuing debt service after retirement. Like it or not, today’s borrowing may insure that you have to sell your home at retirement, or gamble that you can continue working til 75.
Today’s financial decisions have a long tail. If you have a mortgage with a final payment after your target retirement date, look for ways to pay the mortgage down faster than required: pay twice a month or make more than the minimum payment.
Bankrate put buying more house that you can afford at the top of their list of 9 dumbest retirement moves. If the house has no equity and the mortgage payments strain your budget while working, consider selling if you can rent for less. Put the difference aside for a secure retirement.
Cathy Moran, Esq.
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