How Old will you be when your Mortgage is paid

 
 
Given the spate of refinancing in recent years, it's a fair bet that the final date when a homeowner is mortgage-free has been moved further into the future by at least some number of years.
 
If you look at cycles of home sales and then interest rates, you'll likely find that there have been periods of "high" interest rates and solid home sales; by way of example, 30-year fixed-rate mortgages averaged during the last "boom" were routinely in the low to mid 6 percent range (with a few exceptions, October 2005-late 2008 rates were all above 6 percent) and 5-6-7 percent rates were common -- and we started the last decade (Y2K) with rates well above 8 percent.
 
Mortgage rates broke into the 4s in 2009 for the first time in about 50+ years, and broke below 4 percent for the first time in about 60 years in early 2012. We've not been higher than the mid-4s since.
 
Millions of mortgages were originated... then refinanced... and in many cases, refinanced again in that time. A mortgage over 8 percent in 2000 would have been expected to be satisfied no later than 2030 -- but tempting interest rates and the promise of lower monthly payments have likely seen at least some of these refinanced in the last few years, pushing the latest payoff date into the 2040s.
 
Of course, this assumes folks stay put. They don't. The typical age of a first-time homebuyer is about 32 years old; most first-timers stay put between 9 and 13 years, so that suggests that there are a lot of people getting new mortgages at ages 41-45. As a larger "trade-up" home can mean higher costs, many will take new 30-year terms, but some will opt for shorter loans, all things being equal. A later start in homeownership means less equity building, too, so the next mortgage may be larger than it would otherwise be, and that mortgage could both last until much later in life and be more costly than it would otherwise have been.
 
The Consumer Financial Protection Bureau says the percentage of homeowners ages 65 and older with mortgage debt increased from 22 percent in 2001 to 30 percent in 2011. Among homeowners 75 and older, the rate more than doubled, from 8.4 to 21.2 percent.
 
Even though interest rates have been largely stagnant for the last few years, rising home prices are again providing tappable equity, and so there is increasing refinance activity, not to get lower interest rates and for other purposes, but to extract equity from homes. Should this persist, at least a percentage of borrowers may never pay off their first mortgage... and we have not even considered how many will replace these in time with reverse mortgages or maintain home equity lines of credit long after first mortgages have been extinguished.
 
As sad as it is to say, over time, being mortgage-free -- something celebrated by folks in times of old (ok, probably up through the 1970s) with a "mortgage burning" party will probably largely become a thing of the past.
Dan DaCosta

Dan DaCosta

REALTOR®
CENTURY 21 Champ Realty Ltd., Brokerage*
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