Everyone yearns to retire without a mortgage. Having no financial obligations to lenders means retirees have extra money to spend on things and people that matter.
Unfortunately, many retirees don't realize that dream. A study from Harvard's Joint Center for Housing Studies shows that close to 50% of seniors aged between 65 and 79 are still paying off their mortgages. Three decades ago, that figure was less than 25%.
This may sound concerning, but here comes the good news: there are practical ways to help your parents retire without a mortgage. In this post, we share six practical tips to help your parents enjoy the peace of mind that comes with such an achievement.
Help Them Make Extra Mortgage Payments
The secret to clearing mortgage payments earlier than anticipated is to make extra payments. This will also help your parents save thousands of dollars on interest.
If your parents haven't retired already, you can advise them to adopt this strategy. Help them find ways to cut back on some expenses and put that money towards their mortgage. For example, you can advise them to share rides, eat out less, or invest in energy-saving bulbs and programmable thermostats, among others.
Recommend Downsizing
Let's be honest. At retirement, many seniors want to enjoy a simple life. They don't need two or three separate bedrooms, formal living rooms, and separate dining spaces.
If your parents live in a big house, talk to them about downsizing. Apart from helping them pay for a smaller house in cash, downsizing in the same area means they don't have to move away from their friends.
Talk Relocation
If you can't find an affordable place for your parents to retire to in your hometown, it may be wise to relocate to somewhere less pricey. Although they will make sacrifices on familiarity, they can make up for it financially.
Be sure to pick places with pocket-friendly real estate rates and ample activities for retirees. But these shouldn't be the only considerations. Some cities have higher taxes than others, so it’s worth looking at whether it will be an additional burden to your parents.
Doing your research can help your parents can move to a more affordable city without taking on another mortgage.
Advise Them To Find Roommates
Taking on roommates is gaining popularity amongst retirees. By renting out a spare bedroom, your parents can make extra payments to their mortgage.
Stay-sharing also offers other benefits. For instance, retirees who have embraced stay-sharing say it helps them meet the cost of utilities, maintenance, and other expenses. Roommates also offer companionship and help with chores.
Suggest Renting Instead Of Owning
Selling their current home at a profit and using the income to rent a home can be one of the surest ways for your parents to retire without a mortgage. So, discuss it with them.
Although it might appear as if they're just paying a landlord instead of a lender, the difference can be significant.
For example, when they rent, they don't have to deal with property taxes, roof replacement, and other home maintenance expenses. Additionally, they won’t have zero equity locked in illiquid real estate. They can also save on insurance costs since homeowners generally pay more annual premiums than renters.
Consider Taking Them In
For some families, it can be a nightmare for parents to move in with the kids. But if you or your siblings are comfortable with it, it can be beneficial. And you won't be the first one to do this.
A study by the Pew Research Center shows that about 14% of parents reside in their children's homes — and that number is increasing.
Besides helping them ditch their mortgage, having your parents live with you can help you save on child care and share bills.
The idea of retiring without mortgage obligations is attractive. But the reality is, many retirees will have difficulties achieving it. If your parent is one of them, we hope these tips can help you put a smile on their faces. Got more ideas? Feel free to share them with us.