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Seniors carrying more mortgage debt

When you think of retirement, what comes to mind? For many, it probably includes spending time with friends and family (and spoiling the grandkids), taking vacations and simply relaxing in the family home that's been paid off for a decade or more.

Unfortunately for many Texas seniors in their retirement years, owning their own home is still just a dream as they struggle with a mortgage. As reported by the Dallas Morning News, retired seniors today are holding mortgages at a much higher rate than in previous decades. http://tinyurl.com/ks5zfjp

The data comes from the Consumer Financial Protection Bureau's snapshot of older consumers and mortgage debt released May 7. In its analysis, the CFPB shows how mortgage debt rose sharply from 2001 to 2011. The percentage of American homeowners 65 years old and older carrying mortgage debt increased from 22 percent to 30 percent. Those 75 and older saw the sharpest increase, from 8.4 percent to 21.2 percent. http://tinyurl.com/o8hjxjb

Storm warning

The report, says The Wall Street Journal, raises concerns about older Americans' financial health.

With a mortgage in tow, it reduces the senior's nest egg because of less equity in the home and a house payment taking a significant bite out of a fixed income. The housing bubble of the 2000s exacerbated the problem for some as home values plummeted when the bubble burst.http://tinyurl.com/oh3r22n

Other factors contributing to the rise in retirement age mortgages, the Dallas Morning Newssaid, are Americans buying their first home later in life, providing a smaller down payment than in previous generations and borrowing against the equity they have built up in their homes.

Median mortgage debt for seniors increased 82 percent from 2001 to 2011. And the median amount homeowners owed on their mortgages rose from $43,300 to $79,000.

In the best case, the seniors carrying mortgages are wealthy enough to take on that debt and still maintain their lifestyle. They can still take vacations, go out to eat on a regular basis, entertain friends and family. In a word, they're carefree.

In the worst case, seniors with a mortgage might lose their home altogether in foreclosure.

Good news

In Texas, however, there is a silver lining. As reported by RealtyTrac, Texas, at 1 of every 2,429, is well below the national foreclosure rate of 1 of every 1,137. And Texas' rate of foreclosures dropped 41 percent in 2013 from the rate in 2012. http://tinyurl.com/ozcdqzj

Nearly 80 percent of Americans 65 and older - that's roughly 41 million - own their home, which is the highest ownership rate among all age groups.

Older Americans also tend to be wealthier and got through the housing crash in better shape, meaning they could handle more debt. Seniors are also working longer, earning more now and increasing their Social Security payments when they begin taking them in the future.

And finally, The Wall Street Journal says, Americans' debt payments are at their lowest level in decades relative to disposable income.

We hope this information was useful to you and helps your clients and their families. If you have a specific case or a question, don't hesitate to call our office. As always, feel free to call us for further advice or to share your ideas.

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  • Richard P. Johnson is Board certified Texas Board of Legal Specialization Estate Planning And Probate
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