How to Pay a Mortgage After Retirement
In the best situation, your mortgage is paid off before retirement, leaving you free to enjoy your post-work years without a large monthly payment hanging over your head. In reality, most seniors enter retirement with limited funds at their disposal. Trying to divide that money between medical costs, mortgage payments and other necessary expenses can be a challenge. There are, however, several ways it can be done, including examining your current finances, taking advantage of special discounts and programs for seniors, refinancing your loan and taking out a reverse mortgage.
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Create a budget. Figure out exactly how much money you have and make a plan for spending it wisely. With most seniors retiring in their mid-60s, you need to plan on another 20 to 30 possible years of expenses. How many of those years will be spent paying off the remainder of your mortgage? Remember that your medical costs are likely to go up as you continue to age; paying extra on your mortgage now, if you can, will leave you extra room in your budget later on.
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Minimize other expenses. Look for any discounts or cost-reduction programs you may be entitled to because of your age, military experience, or other factor. Your local Office of the Aging can help you find programs you might be eligible for, such as discounted medical care and prescription plans and auto insurance. Take advantage of whatever programs or savings you qualify for; even a little saved here or there can add up into significant savings, making it easier for you to pay your mortgage after you retire.
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Refinance your loan. If you have less than five years of payments left on your loan, refinancing at a lower interest rate can save you some money every month. An adjustable-rate loan, where the interest rate starts off low, can be a great option for seniors looking to pay off their mortgages with lower monthly payments. This may add to what you are paying overall, but your monthly payments will be a lot less depending on the terms of the loan you qualify for and accept.
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Consider a reverse mortgage. If you cannot afford to pay a mortgage after retirement, a reverse mortgage can actually help to pay your expenses throughout your retirement. These payments are technically taken from your equity, or the money you've already paid toward your home. After your death, or if you sell the home before that point, the money made from the sale will pay back your reverse mortgage. The remainder will be paid to you, or your family in the case of your death. This option removes the burden of a monthly mortgage payment and gives you access to extra money to help out with other expenses you may have.
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