Those nearing retirement should ensure they are in good standing to keep making loan payments after they leave the workforce. However, falling homes values have made retirement difficult for many homeowners.
According to data from the AARP, at the end of 2011, an estimated 3.5 million borrowers over the age of 50 had negative equity. Between 2007 and 2011, the rate of senior homeowners seriously delinquent on payments grew to 6 percent.
“If you’re 65-plus, it’s not like you can take a second job to make the payments,” said AARP executive vice president for policy Debra Whitman. “Your income just doesn’t change much. You have a lot fewer options.”
Additionally, the foreclosure rate on households approaching retirement increased from 0.3 percent to 2.9 percent between 2007 and 2011. As a result, many older individuals moved in with relatives or rented property, which can be costly compared to monthly mortgage payments.
This serious issue affects homeowners from every age group. However, it can be very troubling for those locked into mortgage rates from the market’s peak. Due to negative equity, when it comes to refinancing, they may have limited options.
Is refinancing right for you?
If the value of your property rose during the real estate bubble burst, you may want to refinance prior to retirement to make payments less costly. You may also be able to free up some extra cash to put toward other investments.
However, talking with a mortgage professional, see if refinancing fits your overall plan. Changing the terms of your home loan can extend the time you have to make payments. If you have only budgeted for so many years, mortgage payments beyond then could create issues.
Instead, opt for a loan with a shorter term, such as a 15-year loan. This could create higher monthly payments. But there will be fewer of them, saving you money in the end.
What if a conventional refinance isn’t an option?
Borrowers who cannot qualify for a conventional refinance should consider other options. For example, refinancing through the Federal Housing Administration or Department of Veterans Affairs may be good choices. However, this will depend on your background.
These stress-free options may require less documentation than other loans. However, you must usually show at least 12 consecutive months of responsible habits prior to submitting an application.
HARP could be the way to go
If you think you need additional assistance not provided by an FHA or VA refinance, look into the Home Affordable Refinance Program. This initiative was established in 2009 with the purpose of helping struggling homeowners avoid foreclosure. However, there are a few standards you have to meet.
Discussing your options with a professional at Freedom Mortgage could be you answer to keeping your financial footing during the golden years of retirement.
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