Paying Off Your Mortgage before Settling Into Retirement

At one point in time, retirement meant enjoying your post-working years with a comfortable amount of money in the bank, collecting your retirement benefits or pension, and truly enjoying this time in your life that came as a reward for years of a job well done.  In today’s world, this scenario is unfortunately not the case for many individuals that are nearing retirement age, as the economy has left many hard working individuals with extra debt and financial stress, and many homeowners are refinancing their mortgages at a lower rate and carrying them into retirement.

While extending the loan in order to make smaller monthly payments is definitely helpful in some aspects, carrying this debt into retirement can lead to additional financial stress, especially if the amount of income you are bringing in is significantly lower than your usual paycheck.  It is definitely a good idea for homeowners approaching retirement age to look into paying their mortgage off early, as it allows for a variety of benefits.

Social Security Benefits and Taxes

Many retirees that carry their mortgage into their retirement may find themselves drawing from their retirement IRA or 401k in order to make payments on their mortgage.  When this happens, social security benefits are taxed, and the more you withdraw, the higher amount of social security tax you will need to pay.  By paying your mortgage off early, you will most likely be withdrawing less money from your IRA or 401k, in turn lowering the amount of tax paid on your social security checks.

Using Your Home as a Financial Safety Net

Paying off your mortgage before retirement can also be helpful in the event that you wish to take out a reverse mortgage in the future.  A reverse mortgage is a home loan that is specifically designed for homeowners aged 62 or over, and it allows for homeowners in good standing to draw on their home equity if they are in need of extra funds.

Reverse mortgages do not need to be repaid until the homeowners move out of the home permanently, and you can use the money for home repair, day to day expenses, or simply hold onto the extra funds as a financial safety net.  In order to qualify for a reverse mortgage, the original mortgage must have a low balance or be completely paid off, so paying off your mortgage before retirement will allow you this option in the future.

Lower Your Debt Considerably

Since the mortgage payment tends to be the highest monthly expense for most homeowners, taking steps to pay this debt off early can open up the door to financial freedom in your retirement.  Paying off your mortgage when you are still working will allow for overall lower monthly expenses, and when you are bringing in less income during retirement, this can definitely be helpful.

Weigh Out Your Options

If you have a few years before retirement, there is time to weigh out your options when it comes to paying off your mortgage early.  You will want to consult with your lender in order to determine the best route to go, as there may be certain fees assessed for early repayment.  By taking a few simple steps and negotiating with your lender, you will be able to take care of your mortgage in an expedited fashion, allowing for a comfortable and financially secure retirement.

Elderly Woman Caught in a Reverse Mortgage Nightmare

Arizona senior, 91 year-old Jeanette Ogle will be receiving an unfortunate birthday gift that is guaranteed to make other seniors stop and think a moment before applying for a reverse mortgage, a popular financing option among retirees.

On her 92nd birthday later on in the month, Jeanette’s home, located in Lake Havasu City, Arizona, is set for foreclosure through no fault of her own. The reason Mrs. Ogle will be losing her home is based on the fact that the reverse mortgage documents only contained her deceased husband’s name. In 2007, when she and her husband refinanced the home, they were both included as co-borrowers, and when the reverse mortgage came around, they made it clear that they did not want that to change.

Jeanette is set to lose her home due to an extremely controversial policy that at this point in time is facing at least one lawsuit, brought forth by HUD, the housing agency that handles reverse mortgage applications. This policy states that when one spouse passes away, and the living spouse is not listed on the loan papers, the balance of the mortgage becomes due. If the loan amount cannot be paid by a relative, the home can be subject to foreclosure.

Mrs. Ogle lost her husband John in 2010 and states that she does not understand why she is subject to foreclosure. “We did everything we were supposed to do, I signed every piece of paper, we followed the rules,” she says. Jeanette and her late husband John were under the impression that the refinancing loan that they originally obtained in 2004 would allow them to take out a reverse mortgage that would essentially let them to stay in their home as well as give them the opportunity to have a little extra spending money.

Unfortunately, it is not turning out the way they had hoped. Mrs. Ogle stated in an interview, “I just don’t understand why they are doing this to me, I don’t want to lose my home.”

The reverse mortgage program is quite popular among retirees. And the fact that it is backed by HUD and run through the FHA makes the loans even more enticing. Advertised on television bu famous celebrities like Robert Wagner and Henry Winkler, the program continues to bring in more applicants that are seeking a bit of peace of mind in today’s troubled economy. The program basically allows qualified homeowners to use their home’s equity as a means of cash flow during their retirement. The only requirement is that the homeowners pay property tax and hazard insurance. Typically, no money needs to be repaid unless the homeowners move, sell the home, or pass away.

The issue that Mrs. Ogle is going through is due to a policy change that was implemented in 2008, and the Ogle’s had refinanced a year prior. Currently, the AARP senior citizen’s advocacy group is challenging this policy change that is affecting surviving spouses through a federal lawsuit.

Fannie Mae spokesman, Andrew Wilson, stated on behalf of the company that they have a document signed by both parties (the Ogles) that clearly acknowledges their refinancing documents list John Ogle as the sole borrower. Mrs. Ogle denies this, stating she has no memory of signing a document like that. In a recent interview, she simply stated, “Why would we?” Andrew Wilson is standing by his statement but added that whatever the facts may be, Fannie Mae is definitely “sympathetic” to the situation that Mrs. Ogle is going through, and that they will do their best to delay eviction after foreclosure.