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Mortgages in Retirement

Mortgages in Retirement

| September 20, 2020

Anyone who has gone through the process of mapping out their retirement knows there can be a lot to keep in mind.

Saving, investing, anticipating medical costs, and making sure you have enough tucked away for years to come is just the start.

One question many people overlook is: “Should I pay off my mortgage before I retire?” The answer is more complicated than you may think.

Opportunity Cost

Imagine you have $50,000 set aside that you could use to help pay off your mortgage. Consider, now, rather than using those funds to pay off your mortgage, you instead invest that money.

Sure, it’s tempting to stop making a monthly payment, but what if that $50,000 earned a hypothetical 6% for the next five years. You would have a little more than $67,000. Yes, your house may appreciate in value over the same period of time, but you should consider all your choices for that lump-sum of money.

Eradicate (Other) Debt

Before you pay down your mortgage, any extra cash might be better suited to paying off other kinds of debt that carry higher interest rates, especially non-deductible debt, such as credit card balances.

Make Your Mortgage Work

Some homeowners benefit from a mortgage interest deduction on their taxes.  Here's how it works: the amount you pay in mortgage interest is deducted from your gross income, which reduces your federal income tax burden.  But remember, the further along you are toward paying off your mortgage, the less interest you’re paying. If you’re unsure if you’ll be able to take advantage of this mortgage benefit, we can talk or coordinate with your tax professional. 

Don’t Throw All of Your Liquidity Away

Your monthly mortgage payment may be a large part of your available capital, especially in retirement. Eliminating this debt can sound great, but it may also significantly reduce the amount of cash you have to meet monthly expenses.

Uninteresting Interest

Depending on the length of your mortgage term and the size of your debt, you may be paying a substantial amount in interest.

True, you may lose the mortgage interest tax deduction, but remember as you get closer to paying off your loan—more of each monthly payment goes to principal and less to interest.  In other words, the amount you can deduct from taxes decreases.

Home Is Where the Heart Is

We recognize that there’s a value to your home beyond money.

It’s where you raise your children, make fond memories, and you may want it to remain in the family.  

Paying off the mortgage may help make your home part of your legacy.  

Afterall, some things you just can’t put a price on.


Please let us know if you would like to brainstorm about your specific situation.  We love helping!