Three common things American retirees should avoid with mortgages

More than 40 percent of people ages 65 to 79 have a mortgage, according to the Joint Center for Housing Studies at Harvard University
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More retirees than ever are entering their golden years with mortgage debt.

Additionally, as retirees struggle with affordability – more than a third are spending more than 30 percent of their income on housing, Harvard’s housing studies team found – poor financial decisions about their mortgage can have a significant impact on their month-to-month finances .

With so much on the line, making the right mortgage decisions has as much to do with the help you have by your side as the financial move you’re considering.

“Team up with advisers who encourage independent review of the loan documents and explain how the mortgage fits into the borrower’s overall financial and estate planning strategy,” Bailey Law Firm Founder Jenna Bailey said in an email to The Independent.

“Transparency, written explanations, and the ability to review terms are usually some of the best signs that the advice you’re getting is both responsible and credible.”
Living on a fixed income can be difficult for retirees if unexpected expenses arise, which can push their budget to the limit and, in some cases, drive people into debt.

“A major red flag is pressure to act quickly without reviewing loan estimates and disclosures,” she told The Independent by email.

“Your loan officer should be willing to explain everything, including disclosures, in as much detail as necessary.”
A loan officer who doesn’t seem interested in offering details and is focused on getting you to sign for the mortgage may not be telling you everything you need to know, Krieger said.

“Pressure to act quickly could mean that the lender is attempting to hide something,” she said.

Though a lower monthly bottom line might be the goal of a “refi,” be wary of a lender that focuses only on your monthly payments and is hesitant to explain the wider terms of the loan, which typically include interest rate, repayment length and closing costs.

“Another red flag is a lender promising a lower monthly payment without disclosing the cost or rate,” Krieger said.

Refinancing a mortgage has closing costs, and there are times when the great rate a lender offers you is great because you’re paying extra money for it.

“Usually, the cost to refinance and rate points can be financed into the new loan,” Krieger said.

“Your loan officer should be upfront about these costs so you can make an informed decision that best fits your needs.

Rushing into a reverse mortgage
Reverse mortgages are a unique mortgage product that caters to retirees, generally speaking.

The borrower has to be at least 62 years old and meet several other criteria.

“Reverse mortgages can … get tricky when borrowers don’t have a full understanding of the continuing responsibilities like keeping up with property taxes, insurance and maintenance,” Bailey said.

If you’re considering a reverse mortgage, take your time, read through the terms of the loan, and be sure you know exactly how the product works.

In most cases, you’ll be required to attend a counseling session with a reverse mortgage expert who will walk you through what having one is like and answer questions you may have, according to the Federal Trade Commission.

This counseling session is critical to making a smart and unhurried decision.

“The counselor must explain the [reverse mortgage’s] costs, financial implications, and possible alternatives to a reverse mortgage,” the FTC explains.

“Ask them to help you compare the costs of different types of reverse mortgages and tell you how different payment options, fees, and other costs affect the total cost of the loan over time.”
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