Should You Get a Mortgage in Retirement?

In general, it’s wise to be cautious about taking on new debt during retirement. When your income may not be as high or as predictable as it once was, taking on a mortgage can strain your finances. Using your retirement savings to cover mortgage payments could make it harder to maintain your desired lifestyle or pay for unexpected costs, like medical bills.

It’s also important to consider your spouse or partner when deciding whether to get a mortgage or borrow against your home. If one of you were to pass away during the loan term, would the surviving partner be able to keep up with the payments? Be sure to review your life insurance coverage and any other financial resources you can rely on.

However, there are situations where taking on a mortgage or home-related debt in retirement may make sense:

• You’re still working and expect to continue earning at your current level (or higher) for long enough to pay down a significant part of your mortgage balance.

• You’re retired but have the resources to make a substantial down payment and, ideally, can choose a shorter-term loan, like a 15-year mortgage. While your monthly payments will be higher than a 30-year loan, you’ll likely benefit from a lower interest rate.

Keep in mind that even if your mortgage payment is fixed, other costs—like property taxes, homeowners insurance, utilities, and maintenance—can and likely will increase over time. All of these can take an extra bite out of your retirement savings.

Home Lending Options for Older Borrowers

Older adults and retirees have access to the same mortgage options as any other borrower—with one notable addition. Here are nine types of loans you might consider:

• Conventional loan: Available from most lenders in terms ranging from 8 to 30 years. If your down payment is under 20%, you’ll be required to pay private mortgage insurance (PMI).

• FHA, VA, or USDA loan: These government-backed mortgages often have more flexible qualification criteria. VA loans are only for eligible veterans and their spouses, and USDA loans are limited to properties in certain rural areas.

• Cash-out refinance: Replace your existing mortgage with a new, larger loan and receive the difference in a lump sum to use as you wish.

• Home equity loan: Borrow a lump sum against your home’s equity. Typically comes with a fixed interest rate and predictable monthly payments over 5–30 years. You’ll usually need at least 20% equity to qualify.

• Home equity line of credit (HELOC): A revolving credit line you can draw on as needed, similar to a credit card. After the draw period ends, you’ll repay the balance over a set term.

• Reverse mortgage: For homeowners age 62 or older. This lets you convert your home’s equity into cash, paid out in monthly installments or a lump sum. The loan is repaid (or the home is surrendered) when you die or move out. You remain responsible for property taxes, insurance, and maintenance.

• No-document mortgage: These loans don’t require traditional income verification. While less common, they can be an option if you have irregular income.

• Bank statement loan: Qualify based on your recent bank statements instead of tax returns or W-2s.

• Asset-based loan: Also called asset-depletion loans, these allow you to qualify using your assets—like bank and investment account balances—as proof you can repay the loan.

Whether you’re considering downsizing, buying your next home, or tapping into your equity, understanding your options and planning ahead will help you make the choice that’s right for your financial future.