One of the perks of retirement is no longer having to work. But that’s also one of the drawbacks because it often means living on a fixed income. Some bills, like electricity and insurance, are only going to keep going up despite your retirement. That doesn’t mean you can’t save money, though. Your mortgage is one area where you can have a more affordable payment each month.
Consider Getting a Specific New Mortgage
While you may not have a continuing income source anymore, you do still have
an option for a mortgage. An asset depletion loan allows you to use liquid assets to determine eligibility for the mortgage. With an asset depletion mortgage, your monthly ‘income’ is calculated by dividing your total liquid assets by 360 months (the duration of most mortgage loans). In this way, you can prove you have enough money to cover the loan even without regular income from employment.
You do need money in checking or savings accounts, money market accounts, CDs, retirement accounts, investments such as stocks, bonds, or a combination of these accounts. The lender takes the amount of money you have and divides it by the number of months in the mortgage to arrive at a monthly ‘income’.
Find Out if Your Loan Can Be Modified
When it comes to lowering a mortgage payment, many people’s first thought isto refinance. But there’s another option: loan modifications. Loan modifications can make your mortgage more affordable without the confusion and hassle of refinancing. Loan modifications change the terms of your original mortgage by extending the length of your mortgage, lowering your interest rate, or changing from an adjustable-rate to a fixed-rate mortgage. The exact modifications are up to your lender, but loan modifications are often a good place to start.
Downsize Your Home to Downsize Your Mortgage
You raised a beautiful family in your large home and you’ve held on to it so your kids and grandkids can stay with you when they visit. But paying a higher monthly mortgage payment may not be worth the few times a year that your family visits. If you have considerable equity in your mortgage, you may be able to sell your current home, pay off the mortgage, and buy a smaller home with the equity. On the other hand, if you still owe a large amount on the mortgage, a smaller home may have a more affordable mortgage. This can also have the added benefit of giving you less space and possessions to clean and care for.
Cancel Your Mortgage Insurance
Generally, if your equity is less than 20% you are required to have private mortgage insurance (PMI). This insurance protects your lender if you default on payments. But this insurance is not required forever. Once you exceed the 20% threshold of equity in your home, you might be able to cancel the PMI. Regardless of when you purchased your home, a quick call to your lender can help you determine if your PMI can be canceled now. If it can’t, you may only need to build a little more equity before you can. PMI is typically 0.58% to 1.86% of your original mortgage per year, so dropping it can drop your monthly payment significantly.
Retirement is supposed to be a time when you get to relax and enjoy all that you’ve worked so hard for all your life. It shouldn’t be a time of worrying about how to pay all your bills. Reducing your mortgage can help you have the enjoyable, restful retirement you’re looking for. And it can be done with just a few phone calls and a little paperwork.
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