Many people do not have a choice as to whether their mortgage is completely paid off before they reach retirement age. But given the choice, would you want to retire with or without a required commitment to making monthly mortgage payments? Most people would say they’d rather retire without a mortgage.
Despite wanting to retire without a mortgage, an increasing number people in the United States are entering their retirement years while still carrying a mortgage. This is probably due to one or more common reasons. The first logical reason is that mortgage interest rates in the United States have recently been at historically low levels. This has caused people in all stages of life to refinance their mortgages in order to achieve lower mortgage payments. Another possible reason people nearing retirement or already retired have not yet paid off their mortgages has to do with the ever-increasing cost of living in this country.
Reasons to Aim for a Paid-Off Mortgage as You Enter Retirement
Reduced Income: When most people retire, their household income drops significantly. When there is a debt obligation, such as a mortgage, the ability to make monthly payments becomes more difficult. Even if you plan ahead with a strict budget, you may be faced with unexpected expenses. If this happens, will you have enough to pay your mortgage each month? Having a mortgage paid in full when you are living on a reduced income provides a certain peace of mind.
You May be Able to Draw on the Equity in Your Home: If your home is paid in full when you reach retirement, you truly own a valuable asset – – which means you have a safety net. If you end up needing money unexpectedly during your retirement years, you may qualify for a reverse mortgage. With a reverse mortgage, you are able to draw on the equity of your home.
Reasons to Keep Your Mortgage as You Enter Retirement
Having a paid off mortgage when you retire is often the best option, but it does not make sense in all situations. There are several valid reasons for not paying off your house after you retire. As an example, one advantage to having a mortgage is that the interest you pay on your mortgage may be federally tax deductible.
What to do?
If you are nearing retirement age and you’re not sure whether or not you should attempt to pay off your mortgage, contact The Home Loan Arranger or your financial advisor today. The Home Loan Arranger and/or your financial advisor will discuss with you all of the pros and cons associated with carrying a mortgage into retirement.