At one time, people bought a house and had it paid off before they reached retirement. In today’s world, it’s more common for people to move multiple times throughout their lives, which ultimately means they carry a mortgage into their retirement years. But can you afford a mortgage in retirement?

According to a 2017 study, 44% of retirees between the ages of 60 and 70 have a mortgage and 32% believe they’ll need at least 8 years to pay it off.

If you are retiring or plan to retire soon, consider working with Solivita Living, a central Florida real estate company specializing in 55+ communities. We can help you find your dream home, whether you are downsizing or planning to get a bigger home so that children and grandchildren can come for a visit.

It is important to note that a mortgage can affect several aspects of your finances including cash flow and taxes. You will need to understand how to budget for a house. In this article, we’ll help you understand if you can truly afford a mortgage in retirement.

Advantages & Disadvantages of a Mortgage

Depending on where you choose to retire, the 2017 tax laws make it undesirable to have a mortgage in retirement. You may only deduct interest from mortgages totaling $750,000 and, if you are married filing jointly, the total can only be $375,000. Therefore, you may not benefit as much if you don’t have enough deductions to itemize.

If you’re considering taking assets from your retirement account or cashing in on other investments to pay off your mortgage, you may want to reconsider. Typically, other investments are more flexible and earn more than real estate so if you need cash to cover something unexpected, it’s easier to do with an investment account.

Ideally, you should sit down with your financial advisor to determine whether or not you can afford a mortgage in retirement.

What are the alternatives?

For many people, retirement is a time of change- whether moving to downsize or deciding to rent instead of own. After all, owning a home comes with many expenses, including property taxes, maintenance costs, homeowner’s insurance, and other miscellaneous expenses. If you downsize, you may still have these expenses, but they are typically lower and, in many cases, renting may cost less, depending on the market.

Think about how you plan to spend your retirement years- even if you can afford a mortgage, you may not want to have that expense. On the other hand, maybe you do want to start your retirement in a bigger house and then move to a small condo.

Expect the Unexpected in Retirement

If one thing is for sure, retirement is unpredictable. No matter how much planning you do, you can’t plan for everything. It’s critical that you make sure unexpected events are not going to completely throw off your retirement plans. Consider setting aside funds each year for expenses so that you don’t have to pull from your retirement funds and will be able to afford a mortgage.

If you’re considering retiring, contact the real estate experts at Solivita Living in central Florida. We specialize in 55+ communities offering a variety of amenities to keep you active in your retirement years.