Refinancing consequence

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For many middle-age homeowners, taking advantage of low mortgage rates will have an unintended consequence: As retirees on reduced incomes, they will have mortgages to contend with.

Walter Molony of Annandale would be 84 when the last payment comes due on his 30-year loan.

Malcolm Buckey would be 97 years old when the 30-year mortgage on his dream home in Ponte Vedra Beach, Fla., is paid up.

Experts say these people should carefully think through their financial game plan when opting to take out a 30-year loan rather than a 10-year or 15-year loan to finance a new home or refinance the home they already own.

"You could have a significant financial problem if things don't go as planned," said Mark Zandi, chief economist at Economy.com.

"For instance, your income isn't as strong as you thought it would be and you won't be able to pay off your mortgage as quickly as you had thought. Or, home prices end up being a lot weaker than you expected, and you won't be able to sell and pay off the mortgage," he said.

People of average financial means probably should try to avoid being saddled with mortgage payments when they are retired, financial experts said. Nonetheless, it can make financial sense to take out a longer-term 30-year loan now, they added.

In general, people in their 40s and 50s are enjoying their peak earnings years, experts said. While that can make people better able to handle a shorter-term mortgage, a longer-term one may offer more financial flexibility.

After selling a home in Richmond, Mr. Buckey said he had the cash to pay for his ranch-style home in Florida. He decided to finance about 20 percent of the new house with a 30-year loan because the lower monthly payments offered flexibility, and he also would get a tax break. "It was a budgeting issue," he said. "We wanted to make improvements."