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Respected Contributor
Posts: 2,294
Registered: ‎05-13-2010

Why Mortgage When Downsizing?

Why do people downsize at retirement and still take on a mortgage?  I do know that a mortgage fits into the financial plans of some who have assets of several times the value of their house.  I am talking about the average person who has most of their assets in their house.

 

Why take on debt after retirement?  Why not enjoy more peace of mind?

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Esteemed Contributor
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Registered: ‎05-27-2016

Re: Why Mortgage When Downsizing?

Here are varying viewpoints to consider.  Each case of course, is different.  The variables include region, likelihood of work after retirement, taxes, lifestyle and more.

 

http://www.bankrate.com/retirement/downsizing-home-does-it-always-make-sense/

*Call Tyrone*
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Registered: ‎03-09-2010

Re: Why Mortgage When Downsizing?

Mortgage interest is tax deductible, rates are still low (but starting to go up), and for many, the rate of return on investments is higher than what they pay on that interest.  

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Re: Why Mortgage When Downsizing?

My coworker is considering just that.  She doesn't want the money tied up in the house.  She'd rather have it to have a comfortable retirement.  

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Re: Why Mortgage When Downsizing?

[ Edited ]

THere are many valid reasons to,have a mortgage on a retirement home.  PUtting your cash into a non liquid asset like a home is not always a good idea depending upon what the dollar value of other assets are.  FOr example I live in a over 55 active adult community.  NEighbors of mine paid all cash for their house 9 years ago.  Approximately $400,000.  Now the wife's health is declining and they want to move into a continuing care community with a large up front fee which they have to pay up front.  THeir house has been on the market for over 6 months with no offers.  THey need at least some of the money from,the house sale for the fee and they can't sell and thus can't move.  they are stuck here because they tied up their cash in a asset that cannot easily be disposed of.

 

It amazes me that people just assume that once they retire and buy a retirement home that they will remain in that house until they die. We never know what the future holds health wise and sometimes what we planned and what actually turns out to be needed are two entirely different things.  Man plans and God laughs!

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Registered: ‎05-13-2010

Re: Why Mortgage When Downsizing?

Thank you all for your responses.  I guess I'm really asking when people have the opportunity to get a small house that will not strain them during retirement, why do they add to stress by buying too much house?

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Re: Why Mortgage When Downsizing?

Maybe for a good location.  

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Registered: ‎03-10-2010

Re: Why Mortgage When Downsizing?

I got a mortgage when I retired.  Among many reasons is that I couldn't sell my CA house (in the middle of Mojave) in 2008 (still have it as a rental) and we didn't want to deplete our nest egg to that extent.  We did buy a smaller home but since we hadn't been married all our adult lives (we were in our early 40s) and things like a prior divorce, an unexpected child birth at 45, etc, etc.  The point is not everyone's life goes according to your ideal template, so yes, some of us take out a mortgage when we retire.

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Re: Why Mortgage When Downsizing?

[ Edited ]

MAybe because they want to.  THis is a very vague question with lots of answers.  people want different things out of life and one person's ideal retirement home may not be someone else's.  JUst because you wouldn't do it does not mean other people shouldn't do it.  is there some specific reason you are asking this?

 

 

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Registered: ‎03-26-2010

Re: Why Mortgage When Downsizing?


@MaizeandBlue wrote:

Thank you all for your responses.  I guess I'm really asking when people have the opportunity to get a small house that will not strain them during retirement, why do they add to stress by buying too much house?


I often wonder this as well...we live in a suburban area with large homes, two of my neighbors, who never had children, and are in their 60's-70's have homes that are at least 4000sq ft...our school taxes are enormous....I often wonder why they would choose a high school tax district, a large home, in a child oriented neighborhood...any way, it's not my business, just curious...I know when our kids are grown and gone, we will be downsizing and moving to a less "high rent" area.

Take time every day to enjoy where you are without a need to fix it