Home ownership may be the "American dream," but for many in Louisville, it is something that leaves them deeply in debt. There used to be the notion that if a person purchased a home at age 35 and did not refinance, they will have paid for the house entirely by the time they wanted to retire. However, in today's post-housing boom and bust age, many older homeowners still have a significant amount of mortgage debt.
Over 75 percent of Americans above age 65 own a home, which in general, will be their largest asset. But, despite the past, home prices have more or less recovered. Many homeowners have taken out loans against their homes, and as a result, the equity they had in their home has gone down significantly.
According to one group, in 2013 of those age 55 and up, half still had a line of credit, a home equity loan or a mortgage to pay off. Back in 1998, only 38 percent of homeowners found themselves in such a situation.
At one point in time, a home equity loan was not very risky, as housing prices were assumed to be ever-increasing. Moreover, carrying debt had changed from being a stigma to being the norm. Also, banks and other financial institutions made obtaining a home-equity loan simple as it was quite an opportunity for them. But, the housing bubble did burst, leaving some to be deep in debt or even risk defaulting on their loans.
Some economists wonder whether this situation is sort of a one-time occurrence, the result of an unusually large cave-in of the housing market. Other economists believe that now it has simply become part of reality. Many Americans will have to account for this when planning for their retirement.
According to one professional, housing debt was seeing an uptick, even before the recession. And, it is not going away anytime soon. She reports that older individuals carrying housing debt delay retirement and pursuing Social Security benefits.
In the end, older homeowners who have more debts than they can handle might want to learn more about filing for bankruptcy. A Chapter 13 bankruptcy is one way they can reign control over their debts, while still keeping their home. A bankruptcy attorney can provide more information to homeowners who are wondering whether Chapter 13 is right for them.
Source: The New York Times, "They're Growing Older. Their Mortgage Debt Is Growing Deeper.," Paula Span, Nov. 18, 2016