Things to consider before paying off your mortgage
Debt-free retirement is a dream for many, especially when it comes to paying off their mortgage. Who doesn’t want that burden lifted? But going into the dark from a housing perspective doesn’t always make sense. In some cases, paying off your mortgage can cost you more than hanging on to debt.
Figuring out what’s right for you takes a lot of considerations, including your finances and your emotions. What is good for one person may be bad for another. With that in mind, here’s a look at when it makes sense to pay off your mortgage and when it doesn’t.
Pay off your mortgage:
- If you want to reduce your basic expenses.
Retirement is expensive and housing is one of them. If you have money and it’s earning less than your mortgage interest, paying off your loan might be a viable option. Especially if the thought of being tasked with borrowing money bothers you.
“If you’re looking at a mortgage payment, and there’s still a long time to pay off, and it’s higher than the rate of a relatively risk-free return in today’s market, this would be an opportunity to pay it off,” says Maggi Keating, Certified Financial Planner and Senior Portfolio Manager at FBB Capital Partners. “A lot of the benefits of the mortgage interest deduction disappear anyway when your mortgage ends. “If you’re paying a few thousand dollars a month for a mortgage, that would be a good chunk of cash,” she says.
- So sleeping well at night is a priority.
Peace of mind is priceless, especially in retirement. It might not make sense on paper, but if it keeps your mental state intact and you can afford it, it might be the right choice. This is especially true if you plan to age in place, a growing trend among seniors. According to AARP’s 2021 Home and Community Preferences Survey, about three-quarters of adults 50 and older said they want to stay in their current home or community for as long as possible. Additionally, most would be willing to share their home with a relative other than their spouse (69%) or with a friend (54%) as they get older. For some people, there is no better feeling than knowing that you own your home.