The refinance ‘Seniority Tax’: How a flawed system and aggressive lenders leave older homeowners overpaying for their mortgage

When longtime owe indebtedness serviceman Hillary Moussali worked astatine a section Chase slope branch, an aged antheral walked successful holding a message advertisement with the bank's name, promising "super low" refinancing rates.

"I work the good print, which helium astir apt couldn't adjacent see," said Moussali, who worked arsenic a indebtedness serviceman for Chase from 2016 to 2021. "If helium had conscionable called the 1-800 number, who knows what they would person charged him."

There's a bully accidental they would've charged him thousands of other dollars successful unnecessary costs, according to caller Bankrate probe that finds a costly "Seniority Tax" is consistently imposed connected older refinancers. The Seniority Tax is simply a targeted illustration of a wider Hidden Homeownership Tax revealed by our probe — the systemic overpayment by American owe borrowers.

The Hidden Homeownership Tax

Read much astir however the Seniority Tax plays out, on with akin overpayment consequences for different groups of people.

Full study

New Bankrate watchdog reporting sheds airy connected a cleanable tempest contributing to this Seniority Tax: A stalled lodging marketplace has lessened owe demand, and lenders person sought to regenerate it with gross from owe refinancing. Older Americans, meanwhile, are among the astir charismatic prospective refinancing customers for lenders — they comprise the bulk of homeowners and are sitting connected grounds amounts of equity that could beryllium tapped via cash-out refinancing.

Our reporting — based connected interviews with 14 location indebtedness professionals and manufacture insiders, arsenic good arsenic caller analyses of the Consumer Financial Protection Bureau (CFPB) ailment database — shows however the Seniority Tax isn't a coincidence. It's besides a effect of a deeply-ingrained manufacture civilization that prioritizes selling loans implicit what's successful people's champion interest. 

This radical faces heightened hazard of being talked into refinancing erstwhile it's unwise, with immoderate owe professionals deploying profoundly idiosyncratic tricks and tactics successful pursuit of committee — we're nary longer talking astir elemental mailers with the committedness of savings successful an all-capped reddish font. One indebtedness serviceman who made acold calls to older homeowners says she was pressured to person them to refinance, successful portion by promising a skipped outgo they could usage for a "trip to sojourn their grandchildren."

Being pressured to refinance — whether to an extended word connected a cash-out refi oregon a higher involvement complaint connected a rate-and-term refi, to sanction a mates communal examples — tin person superior consequences: Using Hidden Homeownership Tax data, we estimation the Seniority Tax connected refinancing could outgo homeowners implicit $52,000 connected mean implicit a 30-year owe term. While a decades-long word is seldom omniscient for an older borrower, it does happen, adjacent to seniors who are heavy into their archetypal loan's payoff, our CFPB investigation shows. Because the costs of overpayment tin play retired implicit years, adjacent decades, it's not conscionable the older homeowner who's impacted — their heirs could suffer worth from an eventual location sale.