Don't just resign yourself to being stuck in a bad situation.
Once you retire and move over to a fixed income, you may find that money starts to get tight. This might hold true even if you're entering retirement with a solid level of savings in your IRA or 401(k).
That's why it's important to go into retirement with as little debt as possible. Ideally, you should aim to have any credit card debt paid off before your career comes to an end. It's also a good idea, if possible, to start retirement without a mortgage.
To be clear, not everyone who retires does so at a point when they're mortgage-free. The National Association of Realtors reports that as of late 2021, nearly 10 million homeowners aged 65 and older still have a mortgage.
But if you're able to pay off your home before you retire, you'll have one less expense to worry about at a time when you might have less financial wiggle room. And that's why it's important to borrow strategically for a home if you're first purchasing one in your 50s.
You may want to stick to a shorter-term loan
There's a reason 30-year mortgages tend to be so popular among home buyers. These loans allow for lower monthly payments than shorter-term loans, which can make homeownership more affordable for a lot of people.
But if you sign a 30-year mortgage in your 50s and you don't accelerate your payments, then you can pretty much bank on not paying off your home until you reach your 80s. And that may not be ideal. So if you're buying in your 50s, a good bet may be to sign a 15-year mortgage. If you stick to that schedule, it's more than conceivable that your home will be paid off in full before your career comes to an end.
But that's not the only reason to look at a 15-year mortgage. Another benefit of signing a shorter-term loan is that you're likely to snag a lower interest rate on a 15-year mortgage than a 30-year mortgage. That's because your lender is taking on less risk by loaning you money for a shorter period of time. And in exchange for that reduced risk, you should expect to be rewarded with a lower interest rate.
Can you afford to sign a 15-year mortgage?
If you can swing the higher monthly payments that come with a 15-year mortgage, then you may find this loan product is the best choice for you when you're buying a home a bit later in life. But before you commit to those larger payments, crunch the numbers.
As a general rule, your total housing costs should not exceed 30% of your take-home pay. And those costs should include more than just your mortgage -- they should account for things like property taxes and homeowners insurance premiums as well.
If you can swing the higher payments that come with a 15-year loan, then by all means, sign one. But if you're not sure, then you're probably better off sticking to a lengthier loan -- and trying your best to pay it off as quickly as you can.
FAQs
You may want to stick to a shorter-term loan
Is it wise to buy a house in your 50s? ›
When you're in your 50s, buying a house might cut into your retirement savings significantly, if it pushes your living costs up much higher. Maximizing your retirement contributions may ultimately net you more money than the cash you'd save by paying off a mortgage in the 15 or 20 years before you retire.
Can a 50 year old get a 30 year mortgage? ›
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.
Can a 50 year old get a 25 year mortgage? ›
Getting a mortgage once you're aged over 50 should be relatively straightforward. Most lenders offer standard terms for people in this bracket. That means you should be able to get a mortgage for 25 years at a competitive interest rate.
What is a 55 mortgage? ›
A Reverse Mortgage is a home loan, used for any purpose, where seniors 62 and older (and in some cases as young as 55 years old), can access the equity (cash) built up in their home. It can also be utilized to purchase a home should you desire to be free of having to make a monthly mortgage payment.
What is the oldest age you should buy a house? ›
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.
Is a 55 year old house old? ›
Age is subjective when it comes to houses, but an unwritten rule is that if a home is 50 years or older it's considered “old” and a home built before 1920 is considered “antique.” There are many factors that can contribute to the condition your potential dream home may be in, and thankfully most can be caught during ...
Can a 77 year old get a 30-year mortgage? ›
No age is too old to buy or refinance a house, if you have the means. The Equal Credit Opportunity Act prohibits lenders from blocking or discouraging anyone from a mortgage based on age.
What is the oldest age for a mortgage? ›
Summary: maximum age limits for mortgages
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.
Can you get an FHA loan if you are retired? ›
Loans backed by the Federal Housing Administration (FHA) allow retired borrowers to qualify with a credit score as low as 500 and a 10% down payment. For FHA loans with a 580 credit score, the down payment is only 3.5%.
A lifetime mortgage is a loan secured against the value of your home. You retain ownership, can still live in the property, and it doesn't need to be repaid until you die or move into long-term care.
What is a Rio mortgage? ›
Unlike most traditional mortgage products, the RIO Mortgage doesn't have a fixed term. The RIO Mortgage is an interest-only residential mortgage, available from age 50, but it has no end date.
Is equity release a good idea? ›
Equity release can be a good idea if you need extra funds for retirement, want to stay in your home, and understand the long-term impact on inheritance and overall finances—it's financial flexibility without having to take on new debt.
What is the 50% rule for mortgages? ›
The 50 Percent Rule is a shortcut that real estate investors can use to quickly predict the total operating expenses that a rental property investment is likely to generate. To work out a property's monthly operating expenses using the 50 rule, you simply multiply the property 's gross rent income by 50%.
What is the finance rule of 55? ›
The rule of 55 is an IRS provision that allows workers who leave their job for any reason to start taking penalty-free distributions from their current employer's retirement plan in or after the year they reach age 55.
What is a jumbo reverse mortgage age 55? ›
Jumbo Reverse Mortgages provides qualified seniors* 55+ with high property values the ability to access their equity without a required monthly mortgage payment (property taxes and insurance are still required).
Is it okay to keep your house at 50? ›
Be careful not to decrease your home's temperature to less than 55 degrees in winter or allow your home to warm to more than 80 degrees in summer, as it may leave your home susceptible to damage. An indoor temperature of less than 55 degrees may lead to freezing pipes, while anything more than 80 may damage drywall.
Is it too late to invest in real estate in your 50s? ›
But let me tell you something: age is just a number when it comes to building wealth through real estate. Whether you're in your twenties, forties or even beyond, there's no such thing as being too late to start investing in real estate.
Is it smart to buy a house before retirement? ›
Buying an additional home too early could actually postpone your retirement date because it will put additional financial stress on you that could prevent you from saving as much as you'd like. You also have to consider that your needs will likely be different after you retire vs. before.
How old is the average person when they buy a house? ›
In a recent study analyzing the "sliding homeownership ladder," data showed the majority of residents in California don't own a home until age 49. SUGGESTED: These are the top US states people moved to and from in 2023: See how California ranked. 10 most dangerous neighborhoods in Los Angeles, according to PropertyClub.
