It’s one thing to commit to a 15- or 30-year mortgage when you’re in your 20’s or 30’s and have a (relatively) stable income. But what about when you’re in your 50’s and 60’s and thinking about retiring? Suddenly, those once-manageable monthly mortgage payments can seem like a massive hurdle. But do you even need to worry about that right now? After all, you may not even have a mortgage by then! Wait… what?
Is it even possible to retire without a mortgage in today’s day and age?
Right now, it’s a little less possible than it was a few years ago. Before the recession, Baby Boomers were sitting pretty on homes that were just about paid off – and skyrocketing in value. It was like getting a visit from the “Equity Fairy”. As a result, many of those Baby Boomers used all of that value to their advantage – like taking out second mortgages to help the kids pay for college, or getting home equity loans to pay for brand new gourmet kitchens and spa-like master bathrooms. They figured they could more than make up the cost when they sold their homes down the road. Unfortunately, the housing bubble burst before many of them got a chance to do that. In the end, those Baby Boomers got closer and closer to retirement age – only now, they were saddled with extra debt. Their houses were of no help to them in pay it off now, though. In fact, the average American lost 40% of his net worth during the recession, and those Baby Boomers were no different. As a result, many of them will be unable to have that carefree, mortgage-free retirement they dreamed of.
But what about younger Americans?
Even though they have more time to plan, the investment options are slimmer than they were a few years ago – meaning there’s not as many opportunities to “close the gaps” on mortgages as there were before. For example, back in the mid-2000’s, flipping houses was all the rage. If you had enough for the initial investment, you could make massive sums of money, and relatively quickly, to boot! Today, flipping has started to rise from the ashes, but it’s not nearly as popular as it once was. And, until the housing market gets back on its feet, it won’t be the quick source of money that it once was. So, what are your options in today’s economy if you want to enjoy your golden years without a mortgage hanging over your head?
1. Increase your monthly payments now
By paying a little more now, you can get your home loan paid off sooner. If you don’t think you have extra money to pay now, think again. Remember, mortgage rates are at all-time lows. Take the money you’re saving on interest, and put it towards higher monthly payments. That way, you won’t necessarily need to spend more money than you had originally budgeted.
2. Cool it with additional debt
Just because banks are starting to write more second mortgages and home equity loans again doesn’t mean you have to take advantage of them. Instead, find ways to pay for things without taking out a loan. Even if it means cutting back on “fun” spending now, you’ll thank yourself later!
3. Don’t forget about your retirement savings
Even if it feels like retirement is still a long way away, it’s not. If you don’t put money towards your retirement savings now, you’re going to regret it later. In fact, make your retirement fund part of your monthly budget – just like your car payment or your grocery bills. That way, it will get the attention it deserves!
As long as you learn to work WITH the current economic landscape (and adjust your finances accordingly), you may not have to be tied to mortgage payments all through your retirement!
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