The share of Americans ages 75 and over who are carrying mortgage debt has risen steadily for decades, according to the federal Survey of Consumer Finances: from 5% in 1995 to a historic high of 25% in 2022.
While many older homeowners own their properties free and clear of a mortgage payment, this is not a feasible reality for many seniors. In fact, more than 10.5 million Americans at or over the age of 65 still pay into a forward mortgage loan, according to a study conducted by LendingTree.
But with nearly two-thirds of retirement-age Americans having paid off their mortgages, it means that the average age they have gotten rid of that debt is likely in their early 60s. Stats from 538.com, for example, suggest the age is around 63.
Mortgage-Paying Habits of Average Americans
For example, according to the Census Bureau, fewer than 28% homeowners below retirement age have paid off their homes completely, as opposed to almost 63% of those 65 or older. That makes sense, of course, as older Americans have had a longer time to make payments.
40% of Americans Pay Off Their House — Are They Doing Better Financially? For most Americans, a home mortgage is the biggest financial obligation they will ever have. A traditional mortgage spans 30 years and is often in the hundreds of thousands of dollars, so the interest charges can be enormous.
Key Takeaways. Paying off a mortgage can be smart for retirees or those who are just about to retire if they're in a lower-income tax bracket. It can also benefit those who have a high-interest mortgage or who don't benefit from the mortgage interest tax deduction.
Can a 70-year-old choose between a 15- and a 30-year mortgage? Absolutely. The Equal Credit Opportunity Act's protections extend to your mortgage term. Mortgage lenders can't deny you a specific loan term on the basis of age.
"If you want to find financial freedom, you need to retire all debt — and yes that includes your mortgage," the personal finance author and co-host of ABC's "Shark Tank" tells CNBC Make It. You should aim to have everything paid off, from student loans to credit card debt, by age 45, O'Leary says.
For example, if you plan to travel frequently in retirement, you may want to aim for 90% to 100% of your pre-retirement income. On the other hand, if you plan to pay off your mortgage before you retire or downsize your living situation, you may be able to live comfortably on less than 80%.
In 2022, 66.8% of older households had debt. Overall, the older the head of the household is the less likely the household is to have debt. In 2022 in families in which the head was 55-64, 77.2% had debt. That drops to 64.8% when the head is 65-74 and 53.4 when the head is 75 or older.
Most older adults, those at least 65 years old, own their homes, according to the Joint Center for Housing Studies at Harvard University. Yet, more than 1 in 5 older households — 7 million — rent instead of own, according to the 2023 Housing America's Older Adults by the JCHS.
But debt more than quadrupled in households headed by people aged 65 to 74 in that period (from $10,150 to $45,000 per household, on average), and for those 75 and up it has increased sevenfold (from just under $5,000 to $36,000).
Nearly half — 45% — of all Americans who retire at age 65 are likely to run out of money before they die, according to the Morningstar Center for Retirement & Policy Studies.
Nearly 40% of retirees, for instance, have a mortgage. And the average mortgage balance is over $100,000, which translates to average annual mortgage payments of $10,000 that will last at least 12 years or more.
Older homeowners aged 60-plus years like their homes, many view the equity in those homes as a financial reserve, and a significant share are confident of their overall retirement financial plan and expect to age in place. Importantly, the homeownership rate among this age group is nearly 80%.
"Shark Tank" investor Kevin O'Leary has said the ideal age to be debt-free is 45, especially if you want to retire by age 60. Being debt-free — including paying off your mortgage — by your mid-40s puts you on the early path toward success, O'Leary argued.
In 2022, researchers found that just over 40 percent of homeowners older than 64 had a mortgage, a jump from roughly 25 percent a generation ago.
Owner-Occupied Homes That Are Owned Outright by Location
Mortgage payoff rates vary substantially across the country. While at the national level, the share of homeowners under age 65 who have paid off their homes is 27.7%, not all areas have equal rates of free-and-clear homeownership.
Age isn't a limiting factor, but your income and mobility may be. If you've built up your savings over the years, you may not want a mortgage, preferring to buy a house outright. How Much Is My House Worth? See your free home value estimate in less than two minutes.
Borrowers receiving Social Security benefits can use that income to qualify for a mortgage, including Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI). Lenders will evaluate your gross Social Security benefit because they use your gross income to qualify you for a loan.
Age doesn't matter. Counterintuitive as it may sound, your loan application for a mortgage to be repaid over 30 years looks the same to lenders whether you are 90 years old or 40.
By retirement age, it should be 10 to 12 times your income at that time to be reasonably confident that you'll have enough funds. Seamless transition — roughly 80% of your pre-retirement income. This amount is based on a safe withdrawal rate (SWR) of about 4% of your retirement accounts each year.
Dave Ramsey, the renowned financial guru, has long been a proponent of financial discipline and savvy money management. This can include paying off your mortgage early, but only under specific financial circumstances.
The 2% rule states that you should aim for a 2% lower interest rate in order to ensure that the savings generated by your new loan will offset the cost refinancing, provided you've lived in your home for two years and plan to stay for at least two more.