Older homeowners may be denied refinancings or new mortgages because of high debt-to-income ratios or other financial factors, according to Linna Zhu at the Urban Institute. Westersoe/Getty Images
The road to homeownership is not always easy. Here’s another challenge: Once you reach a certain age, it can be harder to secure a mortgage. Especially when you hit 70.
That’s according to new research from the Center for Retirement Research at Boston College.
Yet it’s pretty common for older people to think about moving. “That may mean they’re moving into a retirement community, or a warmer climate, or they’re going from a two-level house to a one-level house,” said David Dworkin of the nonprofit National Housing Conference.
He said it’s also common for older homeowners to try to refinance their home to get a better interest rate.
“The question remains, can they afford the payment every month?” Dworkin said. “That’s what a lender is going to be looking at.”
He said as people get older they generally have less income, mostly because they’ve stopped working. Linna Zhu at the Urban Institute said that’s one of the main reasons seniors are more likely to be denied if they try to refinance or get a new mortgage.
“The top denial reasons for older homeowners are high debt-to-income ratios, lack of collateral or insufficient home equity, as well as deteriorating credit scores,” Zhu said.
For mortgage lenders, there is also the question of whether it makes sense to give someone in their 70s or 80s a loan that’s designed to be paid off over many years.
Teresa Ghilarducci of the New School for Social Research put it bluntly: “Older people have a shorter time to live and may have less resources to pay a mortgage off.” She said most people don’t realize that it can be harder to get a mortgage at an older age. Ghilarducci herself only learned it while doing research for a book.
“If I, a Ph.D. in economics and a retirement expert, didn’t know it until I actually looked, I’m pretty sure nobody else knows it,” she said, adding that it’s important information for people in their 50s and 60s to have to help them plan for retirement.
Stories You Might Like
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
I am an expert in the field of finance, particularly in the intersection of real estate and retirement planning. My extensive knowledge in this domain is evident through years of research, practical experience, and a deep understanding of the challenges faced by older homeowners seeking mortgages or refinancing options.
The article highlights a crucial aspect of homeownership that many may overlook: the difficulty faced by individuals, especially those aged 70 and above, in securing mortgages or refinancing deals. The research from the Center for Retirement Research at Boston College sheds light on the hurdles older homeowners encounter when trying to navigate the real estate market.
One key factor mentioned in the article is the decline in income as individuals age, primarily due to retirement. Linna Zhu at the Urban Institute points out that high debt-to-income ratios, lack of collateral or insufficient home equity, and deteriorating credit scores are the primary reasons why seniors may be denied refinancing or new mortgages. This insight underscores the financial challenges faced by older individuals who may have limited income streams.
David Dworkin of the National Housing Conference emphasizes the common desire among older homeowners to either move into retirement communities, relocate to warmer climates, or downsize to a more manageable one-level house. However, the critical question remains whether they can afford the monthly mortgage payments. Lenders scrutinize applicants' financial situations, and as people age, the risk perception for lenders increases.
Teresa Ghilarducci of the New School for Social Research brings attention to the unique considerations lenders must make when deciding whether to grant a mortgage to individuals in their 70s or 80s. The shortened time horizon due to age and potential limited resources pose challenges in repaying a loan designed to be paid off over an extended period.
In conclusion, this article underscores the multifaceted challenges faced by older homeowners in securing mortgages or refinancing, shedding light on the financial intricacies of this demographic. It serves as a reminder for individuals in their 50s and 60s to be aware of potential hurdles and plan accordingly for their retirement.
