The Jersey Shore is a fantastic place to retire. A common dilemma, however, among retirees is how to afford retirement while paying on a mortgage. According to the Federal Reserve, among households headed by someone age 65 to 74, over 32% had a mortgage on their primary residence in 2004, up from less than 19% in 1992.Are you heading into retirement and still holding a mortgage? Here are some tips that can help you get started:
– If you have plenty of savings and a modest mortgage, go for the loan payoff. You might consider trading down to a smaller home or even work part-time until you’ve paid off the mortgage.
– If you have cash sitting in, for example, a money-market fund held in a regular taxable account, you could consider using this money to reduce your loan balance. Although you mortgage may be costing you just 6% and the interest may be tax-deductible, your money-market fund is likely yielding only 5% — and you have to pay tax on that income.
If your mortgage is so large that paying it off will hinder your ability to retire in comfort, you should try get the mortgage payment down as low as possible.Even better, trade down. After paying a 5% or 6% real-estate commission and paying off your current mortgage, in most cases, you could put down cash on your new home, leaving you with a smaller mortgage. If you financed the new mortgage over 30 years at 6.5%, your monthly payment would be lower. You might even refinance later in retirement, further shrinking your monthly payment by extending the loan another 30 years. Even in today’s tight credit environment, you shouldn’t have a problem qualifying for a new loan, as long as you have a reasonable amount of retirement income.Thinking of retiring to the Jersey Shore? Begin requesting relocation information. Or, for more personalized service, please call me at 732-775-2774 or visit PatrickParkerHomes.com to learn more about Bradley Beach NJ real estate.