How to Refinance a Mortgage After Retirement
Even after you start retirement, it’s still possible to refinance your mortgage and benefit from lower rates or a shorter loan term. Refinancing can help you save a lot of money if you do it right.
The good news is that even retirees can apply for a home refinance. Today, we’ll dive deep into how you can refinance a home loan after retirement.
Let’s get started!
Is there an age limit for refinancing a home?
The short answer is no, there is no age limit for refinancing a home or even applying for a mortgage. This is all because of the Equal Credit Opportunity Act which ensures that lenders treat applicants with fairness and equality, regardless of their age. In other words, a 30-year-old and a 70-year-old will still be able to qualify for a mortgage refinance.
But how is refinancing different for seniors? The requirements are the same, which include income, asset, debt, and credit score. The only difference is it is generally more difficult for a retiree to meet these minimum criteria.
This is especially true for income as you are likely not to have a full-time job that shows financial consistency. However, this is where other income sources like retirement savings, pensions, and Social Security can come in handy.
In addition, you can expect that a senior will be scrutinized more closely than a working adult. You may also need to provide more paperwork. The good news is that as long as you have the cash to pay for closing costs and the monthly payments, you should not have to worry about it!
Pros and cons for refinancing in retirement
If you’re considering refinancing your home mortgage during your retirement period, you may want to know some of the pros and cons.
Advantages of mortgage refinance in retirement
• Lower monthly payment: Refinancing, in general, can reduce your monthly payment, which may be something you need to ease your monthly budget.
• Shorten loan term: If you have enough financial means, you can pay off your mortgage faster to save money on interest.
• Cash-out on home equity: A cash-out refinance can increase your monthly cash flow, and you can use the cash for healthcare or other expenses.
Disadvantages of mortgage refinance in retirement
• Higher monthly payment: While shortening your loan term may be a good thing, this also means you’re paying more per month.
• More interest over time: On the other hand, lowering your monthly payments will require you to pay more interest overall.
• It may be hard to qualify: It can be harder to qualify if your income is too low.
Tips for guaranteed refinance approval for retirees
1. Prepare your paperwork
Whether or not you’re a retiree, it’s important to gather all your paperwork beforehand to ease the application process. This would include documents to verify your income sources and debt payment. Incomplete paperwork and unverifiable income may lead to delay further down the process.
2. Include all income sources
Lenders will review your income and assets to determine if you’ll be able to pay off the loan or not. For retirees, this could include sources beyond employment, like Social Security payments, IRA and 401(k) plans, pension, and even dividends from stocks or other investments.
Make sure that you’ve included all your income sources. It will help convince the lender that you do have enough assets and financial capabilities to make your new mortgage payments. It’s always useful to have a consistent income.
3. Identify your goal
Why is it exactly that you want to refinance your loan? Is it to lower your monthly payment or pay off the entire mortgage faster? Or perhaps you want to tap your home equity for some cash?
Whatever it is, identifying your financial goals may help you choose the right to refinance program for you.
4. Work with your current lender
An easy way to ensure that your chances of getting approved are higher is to simply work with your current lender. Most likely, they already know a lot about your loan and current financial situation.
Your lender can also guide you through the process and choose the best refinance program that you can qualify for. Best of all, if you have a good and solid relationship with them, they might be willing to lower some of the requirements for you!
5. Increase appraisal value
Finally, there’s a huge chance that you will need to conduct a new home appraisal for your refinance. It can be a good idea to maximize your home value during the process, which is surprisingly quite simple with some proven tricks.
The first tip is to boost your curb appeal by making necessary adjustments or fixings to the exterior of the house. Whether that is painting or improving the landscaping, this can boost your home value. It’s also worth it to declutter the interior and tidy up inside, which can help make the space look bigger.
Types of mortgages after retirement
Other than refinancing, there are also several mortgage options that seniors can apply for after their retirement. These include:
• Rate and term refinance: This lets you change your mortgage rates, your loan term, or both.
• Cash-out refinances: A cash-out refinance allows you to take out some cash in exchange for your home equity.
• Reverse mortgage: You can apply for a reverse mortgage if you’re at least 62 years old and are primarily living in that home.
• Home equity loan: Similar to a cash-out refinance, you can use a home equity loan to create a second mortgage in return for some cash in a lump sum.
• HELOC: This is a type of home equity loan that gives you cash through a line of credit.
At the end of the day, refinancing can be a helpful financial tool that you can leverage to get a smaller monthly payment, lower interest rates, or change your loan term. It’s all a matter of knowing why you need it and how you can financially benefit from the process.
Don’t worry because you can still apply for a refinance even after you retire and don’t have fixed employment anymore! We hope this article was useful enough to help you understand more about refinancing as a retiree.