Retirees: Refinancing take some diligence

Retirees: Refinancing take some diligence


Retirees who rely on Social Security, pension and investments need different budgeting techniques from when they drew a paycheck.

Except many of today’s retirees carry an expense once shouldered primarily by working people: A mortgage.

“We will examine the current mortgage to see if there are any opportunities to lower their monthly payment,” says Scott McCaskill, a Frederick, Maryland financial planner.

Indeed, with the value of their retirement investments pared from the COVID-19 induced economic shock, refinancing into a lower rate mortgage is a priority for many retirees.

But the distressed economy also means that mortgage approval might be more difficult.

Standard procedures now less standard

Typically, lenders consider fixed income sources, like Social Security payments and pension, as monthly payments that can fund mortgage expenses. For income derived from investments, it’s standard for lenders to shave 30 percent from the portfolio’s value, and then calculate monthly income from dividends and interest.

“This is still standard practice,” notes Ryan Parks, SVP of Canton, Massachusetts-based Citizens Financial Group. But, “some lenders may have tightened up this policy under the economic conditions.”

Extra measures lenders may now employ

“Due to COVID-19, we are now requiring that all investment accounts be updated within 30 days of closing,” report Joe Nunziata and Rob Nunziata, co-CEOs, FBC Mortgage, Orlando, FL.

Financial planner McCaskill says he’s been asked to submit letters to lenders on his clients’ behalf. Typically, he’s asked to “outline all of [a client’s] investment holdings, what income distributions are guaranteed, and the current withdrawal rate.”

Age doesn’t matter

Retirees looking to ease a tight monthly budget often refinance into a new 30-year loan, where payments are lower than with shorter-term loans, relates Charles Chedester of Midwest Family Lending, Urbandale, IA.

“If you are 60 and want to do a thirty-year loan,” he explains, lending rules allow it, if income sources will support the monthly payments.


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