Mortgages are the largest debt owned by many Americans, but paying them off before reaching retirement age isn’t feasible for everyone. In fact, across the country, nearly 10 million homeowners who are still paying off their mortgage are 65 and older.
To better understand where homeowners are likely to still be paying off their mortgage once they are near or past retirement age, Jacob Channel, senior economic analyst at LendingTree, used Census Bureau data to look at the share of homeowners who are 65 and older and still have a mortgage in each of the nation’s 50 largest metropolitan areas.
Channel found that across these metros, an average of nearly 19% of homeowners who are 65 and older are saddled with a mortgage. The report also found that homes owned by people in this age cohort tend to be less valuable than those owned by the general population — and that their monthly housing costs tend to be lower.
Here are some key findings from the study:
The largest share of 65-and-older homeowners with a mortgage is concentrated in Miami, Los Angeles and Sacramento, California. Across these three metros, an average of nearly a quarter — 23.64% — of homeowners 65 and older have a mortgage. That’s about five percentage points higher than the 50-metro average of 18.91%.
Three Texas metros — Houston, Austin and Dallas — are where the smallest share of homeowners who have a mortgage and who are at least 65 reside. An average of only 13.71% of homeowners who are 65 and older have a mortgage in these metros.
Typically, the homes owned by those 65 and older are worth less than those owned by the general population.
Across the nation’s 50 largest metros, older homeowners’ residences are worth an average of $10,626 less than homes owned by the general population. That being said, the disparity in value varies by metro, and there are a handful of areas where homes owned by older people are worth more than those owned by the overall population.
Even if they are still paying off their mortgage, older homeowners usually have lower housing costs. Across the nation’s 50 largest metros, the average total monthly housing costs for 65-and-older homeowners with a mortgage are $268 less than they are for the general population.
“Because the conventional wisdom is that a person should pay off their mortgage before they reach retirement age, I was initially surprised at just how many people in their mid-60s and beyond still had a mortgage,” said Channel. “But when I started to look deeper at the figures and thought about how expensive housing has gotten and how many people simply can’t afford a home until later in life, the numbers started to make a lot of sense.”
He said there are several reasons why older homeowners tend to have lower housing costs. Here are three big ones:
“First, as we age, people are more likely to downsize and move into smaller, less expensive homes,” Channel explained. “While there are a few exceptions depending on factors like their interest rate, down payment, and the term of their mortgage, homeowners who own these less expensive homes tend to have smaller payments than someone in a bigger house would.”
He added that older homeowners tend to have stronger financial profiles and better credit scores than younger homeowners do, which means that they can qualify for lower rates, which results in lower monthly payments.
The final reason stems from how mortgages work. “Assuming they have a fixed-rate mortgage and don’t refinance or otherwise modify their loan, a homeowner’s mortgage payment is unlikely to drastically rise or fall throughout its lifetime,” said Channel. “It may fluctuate up or down depending on increases and decreases in things like taxes and insurance, but the principal and interest that a homeowner pays will remain constant. This is true even if the value of the home that is mortgaged rises.”
Because of this, older homeowners who bought their homes years ago with smaller loans that reflected lower housing prices are generally going to end up paying less than what a younger, more recent, buyer would because more recent buyers are getting larger loans that reflect higher prices, Channel explained.
Nationally, a little more than 15 million homeowners 55 to 74 years old don’t have a mortgage compared to about 17.7 million who do. For comparison, about 9.6 million homeowners 65 and up have a mortgage, while more than 16 million (16,184,634) don’t.
“Based on these figures, it’s clear that a majority of Baby Boomers still have a mortgage,” said Channel. “However, as they continue to pay off their loans within the next decade or so, Baby Boomers with a mortgage will likely become the minority.”