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Older Americans still struggling with significant mortgage debt

Millions of Americans suffered at least some kind of financial hit when the economy took a nose dive several years ago, and while there has been recovery since that time, it seems to not have reached all aspects of consumers' financial lives. For instance, many people who had planned to be retired by this point are still in their jobs, simply because they still carry significant mortgage debts.

The average home loan balance owed by homeowners who were 65 or older in 2011 (the most recent year for which complete data was available from the Consumer Financial Protection Bureau) was $79,000, up from an inflation-adjusted figure of just $43,400 only 10 years earlier, according to a report from Bloomberg News. Further, the number of people carrying those debts has likewise increased precipitously, rising to 30 percent of all people 65 and up, from just 22 percent in 2001.

The reasons for this are myriad, but perhaps chief among them is the fact that many chose to refinance their existing home loans in the years leading up to the housing market's downturn, reducing their monthly payments considerably but spreading their balances over a larger number of years, the report said. Many more purchased second homes during the sector's boom years, potentially adding to their balances significantly, and giving them far less flexibility.

"Hit with a financial downturn or an unexpected cost, they often are in a position where they don't have the ability to recoup whatever losses they may have suffered," Stacy Canan, deputy assistant director at the CFPB's Office for Older Americans in Washington, D.C., told the news agency.

A problem without a solution
Meanwhile, it should be noted that experts believe this problem of carrying debt into what should be a worker's retirement years is going to persist for some time, potentially decades, the report said. That's because Generations X and Y are typically getting into the market much later than their parents or grandparents, meaning they'll be carrying that debt for longer periods of time.

Some experts further note that this could also be an impediment to the housing market overall, because it could keep would-be buyers from having as much choice as they might like when it comes to shopping for a home. That issue could become particularly problematic for those hoping to lock in the affordability available in the market now.

By: Equity National   September 5, 2014     Closing

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