As the country patiently waits for the housing market to rebound, older Americans are finding it more difficult to get approved for mortgages — whether for new home purchases or refinancing. Even with signs of market cooling on the horizon, it begs the question: Should older Americans rent in retirement instead of paying a mortgage?
Difficulties Getting Approved for a Mortgage
As The New York Times reported, it’s not uncommon for older Americans to be denied a mortgage or a refinance deal due to insubstantial retirement income or advanced age. This is despite the fact that older individuals typically have better credit scores than those younger.
According to a working paper by Federal Reserve Bank of Philadelphia economist Natee Amornsiripanitch, “Age appears to be an equally important correlate of mortgage application outcomes as race and ethnicity. Overall, the results suggest that older individuals systematically face higher barriers to mortgage access.”
Mortgage applicants are increasingly rejected as they age and more so after they reach the age of 70, Amornsiripanitch suggested.
Living Your Best Hassle-Free Retirement
Living comfortably in retirement might mean making a tough decision between paying a mortgage off and downsizing to a rental property, but regardless of mortgage versus age stats, renting can sometimes be the ideal solution to simplify many aspects of a retiree’s life. Whether you should sell or stay in a home depends upon your finances, mobility and desired lifestyle.
Needs change as you age, and holding on to a bigger home than you need is often an impractical expense motivated by sentimental factors. Owning property requires extra estate planning, as well as more difficult day-to-day expenses and mobility issues to consider.
Your home’s layout might have worked when you were younger, but in your senior years, it may need some serious and costly restructuring. General upkeep and cleaning a big house can become difficult, and stairs can become a daily dreaded obstacle to getting anything done. With children gone from the nest, you may not need (or desire) to maintain a big space.
Often the most important factors in deciding whether to rent or pay a mortgage are how long you intend to live in a house or rental — and how much you’re willing to spend. Renting should always be the top choice if you are transitioning to another area, a relative’s house or a seniors’ residence in the relatively near future.
The decision of whether to rent or buy in retirement is a personal one that only you can answer, but whatever you do, your decision shouldn’t be end up costing you more as each retirement year passes. As Candice Williams, a realtor at Coldwell Banker Realty in Houston, advised, “Ensure that your next move — whether to become a renter or purchase another home — does not expose you to a higher level of monthly living expenses that may put your finances at risk.”
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