The Joint Center for Housing Studies of Harvard University found both the share of older homeowners with mortgage debt and the amount of debt they carry has risen over time.
From 1989 and 2016, the share of older homeowners with mortgage debt more than doubled—17% to 43%—while the median loan-to-value ratio on that debt nearly tripled.
Nearly 40% of older adult homeowners with a mortgage were housing-cost burdened in 2017 (spending more than 30% of their income on housing) compared to just 16% of those without mortgage debt.
“Still, the rise in mortgage debt among older homeowners could represent a well-reasoned choice to avoid paying down these loans in order to save more in other financial vehicles or have more disposable income for other needs,” said Alexander Hermann, the report’s author.
A recent report by Hermann also found that holding high levels of mortgage debt is associated with a lower level of financial well-being and a greater likelihood of being insecure among older adult homeowners.
Harvard sourced a report by the Consumer Financial Protection Bureau (CFPB), which supports Harvard’s research, says financial well-being is the “state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life.”
The report added that having high levels of mortgage debt nearly doubled a homeowners’ chance of being financially insecure, raising the odds by 8 percentage points to 17%.
“Having high levels of mortgage debt increases the odds of being financially insecure by 15 percentage points for those with annual incomes under $30,000 and 13 percentage points for those with savings under $15,000,” the report said.
The report states that even though mortgage debt is the largest source of debt, people feel less burdened by it, as that type of debt is considered a “good debt” as it contributes to consumers’ financial future.
Fourteen-percent of all millennials surveyed is concerned over mortgage debt—the highest among the three generations polled. Thirteen-percent of Gen X’s surveyed were concerned about mortgage debt and just 10% of Baby Boomers were worried.