Assuming you qualify with credit, income and assets, yes, a 70 year old can get a 30 year mortgage. Here’s a better question. Should a 70 year old get a 30 year mortgage, home equity line of credit, or any other traditional type of home loan? The answer is that it depends on your situation and what you are trying to accomplish.
In general, there are only a handful of reasons to consider a traditional mortgage during retirement. Otherwise, a reverse mortgage is typically a much better option and provides much more financial flexibility and safety over a traditional home loan.
Here are the reasons why a 70 year old
should consider a 30 year mortgage
1. You’re Buying A New Home With a Down Payment of 50% or Less
2. You’re planning on selling the home within the next few years.
3. You’re purchasing or refinancing a rental property, second home or vacation home.
4. You don’t have enough equity to qualify for a reverse mortgage.
5. You need cash beyond what would be available with a reverse mortgage.
6. You’re living in or purchasing a home with family that will continue to live in the home and make the payments when you’re gone.
7. You have plenty of income and assets to where the mortgage payment would not be a burden, even if a spouse’s income was lost, and it won’t deplete retirement assets too quickly.
8. The property is in such a state of disrepair that it would not qualify for a reverse mortgage.
Here’s Why A Reverse Mortgage is Generally A Better Option for a 70 Year Old Than A 30 Year Mortgage
or Other Types of Home Loans
Loss of Spouse or Income – Just because you qualify for a 30 year mortgage does not mean it’s the best option for you. In fact, it could be putting you or your spouse in financial jeopardy when either one of you passes away. A 30 year mortgage could put you in a situation where the home will need to be sold after a spouse passes away because the remaining spouse will no longer be able to afford the payment.
When a mortgage company looks at your ability to afford that 30 year mortgage. They are only looking at your income and that it is expected to continue for the next 3 years. They will not and do not take into account what your income would look like if either spouse were to pass away.
For example, let’s assume your Social Security income is $2200 and your spouse’s Social Security income is $1800. That is a total of $4,000 a month. You could very well qualify for a monthly payment of $1600 or more, but let’s just say it’s $1600.
Assuming you had no other debt, that monthly payment could be affordable. But, there is a financial time bomb just waiting to happen. Nobody considers the consequences of what will happen if a spouse passes away. Or they just ignore it because they think they have no other options. Or they just think they’ll figure out a solution to that problem when it appears.
If either spouse passes away, there will be a loss of $1800 of household income. Which means that the remaining spouse will now have a $1600 a month mortgage payment with just $2200 a month of income. That means 72% of their income is going towards the mortgage payment and they would only have $600 a month for food, utilities, transportation etc. Would you want to be in that situation? Would you want to leave your spouse in that situation?
The good news is that there is a simple solution to that problem.
Monthly Mortgage Payments Are Optional – With a reverse mortgage, monthly mortgage payments are optional. You still have to pay property taxes and homeowners insurance. You can pay as much or as little as you want towards the mortgage including nothing at all.
This is a huge benefit. Getting back to our example above, if either spouse passes away, the remaining spouse will not get saddled with a mortgage payment that is will be financially unsustainable to them.
For example, you have been making mortgage payments of $1600 a month for the last 5 years. You pass away. Your spouse can immediately stop making mortgage payments. Your spouse will just need to pay property taxes, homeowners insurance and any other property charges such as utilities, flood insurance (if applicable), homeowners association dues (if applicable). Life will be much more financially sound for your spouse when you are gone.
Monthly Mortgage Payments Are Saved – With a 30 year mortgage, every payment you make is gone. A portion of the monthly payment goes towards interest and the portion goes towards paying down the principal.
With a reverse mortgage, assuming you use the adjustable rate options, every payment you make not only pays down the loan balance, but the money increase your line of credit. In other words, you have access to every payment you make towards the loan.
Assuming, you made payments of $1600 a month, at the end of 5 years there would be $96,000 available in the line of credit. Actually, there would be more available than that because any funds available in the line of credit grow at whatever the current interest rate is plus .5%. Think of it like a savings account.
So, if you or your spouse were to pass away in 5 years, not only can you or they stop making payments, you now have $96,000 available to you in the line of credit. On top of that, if you draw any of those funds from the line of credit, you still do not need to make a payment. You or your spouse will be in a much stronger and much safer financial position than either of you would have been with that 30 year mortgage.
The bottom line is this. As a 70 year old you can get a 30 year mortgage or any other type of home loan assuming you meet the income and credit requirements. But, a 30 year mortgage brings substantial financial risks. A reverse mortgage is more than likely a much better choice because of the financial flexibility it brings to the table. Before applying for a 30 year mortgage, I would highly recommend looking into and getting educated about the reverse mortgage.
If you want more information you can request a free copy of my book. Yes – it’s an actual physical book, I even pay for mailing. If you’re not a reader you can also watch a presentation about reverse mortgages and how they work. Or you can do both.