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.
An unmortgaged home was once a retirement perk
Mark Iwry, nonresident senior fellow at the Brookings Institution. But that pattern is changing. In the Michigan study, researchers found that the share of retirement-age homeowners with mortgages rose from 38% to 51% in a generational span of about 25 years.
There is no specific age to pay off your mortgage, but a common rule of thumb is to be debt-free by your early to mid-60s.
U.S. homeownership rate for householders over 65 years old 2011-Q3 2024. The U.S. homeownership rate for householders over 65 years of age fluctuated between 78.8 percent and 80.9 percent since 2011. In the third quarter of 2024, approximately 79 percent of people over 65 years of age inhabited an owner-occupied home.
Buying a home after 60 can make sense if you have sufficient monthly income and find an affordable home. In addition, if you're physically capable of maintaining the home or can pay for extra help, homeownership won't become burdensome.
The table below shows the percentage of homes without a mortgage compared to the total number of available homes on record from 2010 to 2022. 2 These figures show that the percentage of mortgage-free homes has increased steadily, from 32.78% in 2010 to 39.28% in 2022.
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.
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.
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.
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.
All of this creates an atmosphere of risk around older borrowers. The upshot is that if you're over the age of 62, you're almost 30% more likely to get rejected for a standard mortgage.
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).
This problem has become more pressing over the years. Half of the retired homeowners who were born in the early years of the baby boom wave are still making mortgage payments. They are in a very different situation than their parents' generation when the majority of retirees owned their homes free and clear.
Adults aged 65 to 74 hold an average of $134,950 in debt, while individuals 75 and older hold an average of $94,620 in debt, according to Federal Reserve data analyzed by MarketWatch. By the numbers: Nearly 65 percent of Americans 65 to 74 held debt in 2022, compared to about half of seniors 75 and older who held debt.
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.
"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.
Americans in their 70s have an average retirement savings balance of $1,068,290; the median is $509,038, putting some 70-year-olds in the retirement millionaire bracket. Most Americans retire in their mid-60s and may start to see healthcare costs eating up a portion of their retirement nest egg.
Yes, there are home loans specifically designed for people on Social Security. These include government-backed options like FHA loan, VA loans and specialized products from private lenders. Reverse mortgages are another option, particularly tailored for seniors.
Generally, a creditor such as a lender cannot use your age to make credit decisions. However, there are exceptions to this rule. For example, age can be considered in a valid credit scoring system but it can't disfavor applicants 62 years old or older.
Many lenders impose an age cap at 65 - 70, but will allow the mortgage to continue into retirement if affordability is sufficient. Lender choices become more limited, but some will cap at age 75 and a handful up to 80 if eligibility criteria are met. Term lengths may be restricted.
By the numbers: The share of mortgage-free U.S. homes has jumped from 34.3% to 39.3% in the past decade, per the census data. Between the lines: There can be a psychological perk to paying off a loan early, but according to some personal finance experts, it could be smarter to invest that money instead.
As you may have gathered, we actually believe it's good to have a mortgage. Of course owning a home “free and clear” is a good thing too, yet if the choice is between having a long mortgage or a short mortgage, we'd recommend the long mortgage. As we mentioned, mortgages get better with inflation.
Almost 40% of US homeowners own their homes outright as of 2022—many of them baby boomers who refinanced when rates were low. Anthony and Emily Stump, with Bo. This article is for subscribers only. This article is part of the November 20, 2023 issue of businessweek.