As the numbers of seniors carrying mortgage debt in retirement has increased, so too has the potential financial burden of a regular monthly mortgage payment. Increases in inflation and the cost of living can overwhelm those living on a fixed income, according to an article published this week in USA Today.

“Retirement researchers warn that mortgage debt in retirement can be a trap,” the article explained.

According to data from the Survey of Consumer Finances maintained by the Federal Reserve, the share of Americans ages 75 and older who have mortgage debt has risen from 5% in 1995 to 25% in 2022.

The amount that these same homeowners owe on their mortgages has also risen considerably, going from a median of $14,000 to $102,000 in the same period of time.

An increase in home values has generally put older homeowners on better financial footing overall, but if most of one’s net worth is tied up in the illiquid asset of home equity, then the presence of a regular mortgage payment may not make older homeowners feel like they’re better off.

A 2023 study published by the Michigan Retirement and Disability Research Center at the University of Michigan, which was cited by USA Today, found that a “typical” retiree often does not have the financial resources or assets to adequately cover their mortgage debt.

“Researchers found that retirees with larger mortgages face greater financial peril. Households with more mortgage debt tend to postpone retirement and to spend less money once retired,” the outlet said. “They also tend to sell their homes sooner than retirees with smaller mortgages or no mortgage.”

A number of reasons have been offered by experts for these changes. Homebuyers as a cohort are getting older, with 2023 data from the National Association of Realtors (NAR) showing that the typical first-time buyer last year was 35, while the average repeat buyer was 58. Baby boomers may be more comfortable taking on mortgage debt in later life when compared to their older counterparts.

As far as potential solutions go, one suggestion is the common route of downsizing — selling an existing home and using the sale proceeds to move into something smaller. But USA Today also mentions the possibility of using a reverse mortgage.

“It’s a loan that allows a homeowner to tap into equity, with the home as collateral,” the outlet said. “The loan generally becomes due when the owner dies, moves or sells.”

The research from the University of Michigan “begs the question, what about reverse mortgages, and why aren’t they a reasonable part of the solution?” J. Mark Iwry, a nonresident senior fellow at the Brookings Institution, told USA Today.



Have A Question?

Use the form below and we will give your our expert answers!