Podcast Episode Details

The Danger of Mortgage Payments in Retirement with Harlan Accola

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Episode 573

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“The prudent see danger and take refuge, but the simple keep going and pay the penalty.” - Proverbs 22:3

That verse is all about how critical it is to look ahead and spot potential problems so you have more time and resources to fix them before they happen. Harlan Accola joins us today to discuss the dangers of keeping mortgage payments into our retirement years.

Harlan Accola is the National Reverse Mortgage Director at Movement Mortgage, which is an underwriter of this program. He is also the author of Home Equity and Reverse Mortgages: The Cinderella of the Baby Boomer Retirement. 

The Changing Landscape of Retirement and Debt

Today’s retirees face a vastly different financial landscape compared to previous generations. In 2024 alone, 4.2 million people will turn 65, and more than 50% of them are still making mortgage payments—the highest percentage in history. This contrasts sharply with previous generations, where fewer than 5% of retirees carried mortgage debt into retirement.

Several factors contribute to this shift:

• Rising Home Prices: Houses are significantly more expensive than they were decades ago.
   
• Longer Mortgage Terms: More retirees are carrying 30-year mortgages well into retirement.
   
• Financial Strain: Seniors are balancing mortgage payments with other financial obligations such as healthcare, inflation, and even supporting aging parents or adult children.

This financial burden often leads to seniors neglecting their retirement savings, relying on credit cards, and facing increased financial stress.

The Hidden Debt Burden Beyond Mortgages

In addition to mortgage payments, credit card debt is at an all-time high among retirees. This generation was the first to widely adopt credit cards, often using them for convenience and rewards. However, unexpected life events—such as health crises, job losses, or the death of a spouse—can quickly turn manageable credit card balances into long-term debt.

For retirees struggling with both mortgage and credit card debt, the combination can create a domino effect, draining their financial resources and limiting their options.

A Solution: Reverse Mortgages

Many seniors with more than 50% home equity have an opportunity to improve their financial situation through a reverse mortgage. This option allows seniors to:

1. Eliminate Mortgage Payments: The biggest monthly expense can be reduced to zero, freeing up cash flow for other essential expenses.
    
2. Create an Income Stream: If the home is fully or mostly paid off, seniors can tap into their home equity and receive monthly payments, helping them avoid dipping into retirement accounts or relying on credit cards.
    
3. Preserve Retirement Funds: By utilizing home equity, retirees can avoid withdrawing too much from their investment accounts too early, helping to secure their financial future.

The Unique Benefits of Reverse Mortgages

Unlike traditional loans, a reverse mortgage is considered non-recourse debt, meaning that seniors will never owe more than the value of their home. This provides a level of financial security, even in the event of a housing market downturn.

Reverse mortgages allow seniors to stay in their homes while making payments optional and, in some cases, converting their home equity into a steady source of income—all without financial risk beyond their home's value. By understanding and utilizing the tools available, seniors can achieve greater financial freedom and peace of mind in their retirement years.

If you or a loved one are struggling with mortgage payments in retirement, a reverse mortgage with Published on 11 months ago