Why More Older Homeowners Are In Danger of Losing Their Homes
More older homeowners are losing their homes than ever before. According to a report in CNN Money, the foreclosure rate for Americans age 50 or older has risen from 0.3% in 2007 to 2.9% in 2011. Certainly, foreclosure has been a major problem for all groups in recent years. The difference with older homeowners is that they were never considered one of the vulnerable groups before. Yet, now many senior homeowners are either losing their homes or in danger of it.
More Older Homeowners Have a Mortgage Than Ever Before
The biggest factor in the increase in foreclosures for older people is simply that more members of this group even have a mortgage than in past years. In the numbers game, the increase in percentages rises naturally with more vulnerable homeowners in the group.
Owning One Home Is No Longer Considered a Permanent Choice
There was a time in America when homeowners bought a home at a young age and stayed there for the rest of their lives. Some people still do it that way, but it is getting rarer and rarer. People are staying in the job longer, and often that means transferring to new locations. Or, one job might fizzle out and the senior must look harder than her younger counterparts to find a rewarding job. Since there is more moving going on, more older homeowners are starting over with a new mortgage.
Downsizing Often Means a New Mortgage
Many older people are downsizing from a large family home to one that suits their needs better. Condos are particularly attractive to this group because yard and home maintenance are built into the contract. However, the first home may sit on the market for years in today’s real estate climate, and many homeowners end up with two mortgages, at least for awhile.
Many Older Americans Were Caught in the Subprime Fiasco
At a time when more older Americans were beginning to buy new homes or refinance their old ones, subprime lenders were taking advantage of the situation. Even though the older homeowner may not have qualified for a loan in past years, these subprime lenders offered the option of borrowing at a higher interest rate in exchange for loan approval. This was bad news for everyone, but for seniors in particular.
Borrowing Against a Home Has Gotten Ever More Tempting
Lenders have been pushing the idea of borrowing against a home for several years. The homeowner gets extra money to remodel or repair their home. Sometimes they are encouraged to simply use the money to get items they want or to go on vacations. If the older buyer is still working, the reality of living on retirement income may not have sunk in yet. They are encouraged to believe that their home is an asset they should be taking advantage of to fulfill all their needs and desires.
Grandparents Have Moved Off the Front Porch Swing
The stereotypical image of grandparent rocking on the front porch is long gone. Older Americans are more active and energetic than ever. Is this a good thing? Certainly it is. It just means that older people on a fixed or limited income need to carefully weigh every decision to spend money. Getting older is now associated with more freedom. It is important to remember that buying into a new mortgage may take away from that freedom.
There are still plenty of older homeowners who have been extremely intelligent in financial and real estate matters. Even though they have risen, the percentages are still fairly low. The challenge for older homeowners is to be mindful of the value of their homes and only get into a new mortgage when it is truly advantageous.