Should Retired Seniors Carry a Mortgage?

Q: Hello, my question for you is, as a retired senior, is it better to be mortgage free or carry a mortgage and if I am purchasing a new home, and have a current, mortgage free, home to sell, would it make sense to get an interest only loan on the new home until I can sell the existing home?

A: Great question. There are a few things to keep in mind. First, if you take a mortgage... there are going to be several thousand dollars in fees. Then you would be paying interest on that money.

Second, you have to look at what you are currently earning on that money where it's currently at. Are you earning that much more interest that it would be enough to cover all the fees?

Third, you don't know how long it will take to sell your existing home. It's possible that it could sell within 6 months. If that's the case, the fees associated with the mortgage would probably equal several thousand dollars a month.

Lastly, there may be other ways to do it that don't require a traditional mortgage. For instance, I have a client that is in a similar situation. Instead of taking a short-term bridge loan with it's fees and high interest, we are borrowing against his investment portfolio---using margin. The interest rate he pays is considerably less than he would on a bank-type loan and there aren't any fees or time constraints. It allows him to maintain complete flexibility.

Your posted comments on this and other questions are welcome.
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