Your Finance: How seniors with mortgages can stay out of hot water

According to recently published research by the Consumer According to recently published research by the Consumer Finance Protection Bureau, debt is rising for older Americans, and that increase is led by mortgage debt. Photo Credit: iStock

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Four out of five seniors own their home, a rate that hasn't budged for decades. But what is changing is seniors' levels of indebtedness.

According to recently published research by the Consumer Finance Protection Bureau, debt is rising for older Americans, and that increase is led by mortgage debt.

More than 4 million retirees, and 30 percent of all older homeowners, have mortgages to pay every month, which can severely hurt their monthly budgets, especially on a fixed income. And the median amount owed has nearly doubled over the past decade, to $79,000.

A home is supposed to be your nest egg, not a source of financial risk. Elderly homeowners with a mortgage lay out almost three times as much on housing costs each month as those whose homes are paid off. And they are subject to the risk of foreclosure if they fall behind on their note.

If you are a retiree or nearing retirement and your home is not yet paid off, consider these tips to avoid getting into hot water while trying to keep a roof over your head.

Avoid taking out a home-equity loan. Don't treat your home as a piggy bank if at all possible. Think of a home-equity loan by its older, less attractive name: a second mortgage. Taking on a 15- or 30-year commitment to repay a loan has a very different meaning in your 60s or 70s than it did when you were just starting out.

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If your home needs work to enable you to stay in it safely, stick to necessary repairs and maintenance, not elaborate renovations. The government website eldercare.gov has information on funds available to seniors specifically to enable them to renovate homes for safety.

Think twice about the cost of a second home. In the transition to retirement, many people start thinking about buying a little condo on the beach or a cottage in the mountains. Go over your finances with a fine-toothed comb before taking the plunge.

Refinance. At current rates you may be able to get a handsome interest rate discount. But beware of home-equity and loan-modification scams. The first place you should apply to refinance should be your current lender. You also may be able to lower payments by getting a loan modification through the federal government, based on income and other circumstances.

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Sell and move to a rental. Assuming you are not under water -- that is, that the loan on the house doesn't exceed its value on the market -- selling a house is the quickest way to get out of mortgage debt.

On average, older homeowners owe the equivalent of 46 percent of the value of the house itself. That means that by selling, most can pocket a tidy sum of equity. If you sell, downsize to a smaller apartment in a more affordable area, or join family members if that option is available to you, and you'll be turning a liability into an asset.

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