Pre-Retirees: When Your Mortgage Outgrows Your Lifestyle

Having a mortgage when you’re nearing retirement age can be a scary prospect. However, it’s not an unheard of situation. For whatever reason, whether your mortgage term extends into your retirement-date goal or you’ve had to take out a second mortgage/refinance your home and the mortgage is longer than you originally planned or you made poor financial decisions or life dealt you a crummy hand of cards— you may find yourself facing the decision of whether you should keep your home or sell it and look for more affordable living accommodations.

Many people are terrified of even considering selling their home in order to purchase a more affordable home or rent a smaller place. Renting has a bad reputation of being a bottomless pit of expense with no ultimate gain at the end, where purchasing a home is seen as a means to the ultimate end of eventually living without a residential payment.

However, if your mortgage is impeding your lifestyle and you are at the point where you may never pay off your home or you will still be paying on your home into retirement, it’s time to seriously weigh the pros and cons of home ownership vs. being a perpetual renter.

In such situations, the benefits of not being a home owner are likely to outweigh keeping a mortgage, particularly when considered against the other expenses involved with home ownership, from maintenance to taxes to repairs to insurance and liability costs.

From The Experts

Specifically, if the situation is dire (if you are in danger of defaulting on your mortgage or foreclosure), there are options you must consider post-haste.

The Federal Trade Commission recommends the following six options:

• 1. Reinstatement
• 2. Repayment Plan
• 3. Forbearance
• 4. Loan Modification
• 5. Selling Your Home
• 6. Bankruptcy

“You don’t have to go through the foreclosure prevention process alone,” according to the FTC, “A counselor with a housing counseling agency can assess your situation, answer your questions, go over your options, prioritize your debts, and help you prepare for discussions with your loan servicer.”

Most importantly, these services are typically free or very low costing.

A good rule of thumb is to make sure you are not paying more than 25 percent of your income on your home. If your mortgage does not fit your budget, it is time to take a step back and look at what’s realistic for you in this moment.

"Put it all in perspective," real estate expert Tara-Nicholle Nelson wrote in an HGTV blog, "Your home, as important an asset as it is, is just that – a building. Even if the very worst that can happen to your home (foreclosure) does happen, that is certainly the worst thing that can ever happen to you […] Instead of viewing your situation as a tragedy, it might be the nudge you needed to get out of your comfort zone and make some hard priority choices – choices that could have major upsides for your life over the long term, if you face them head on."