If you or a loved one are approaching retirement, you may be wondering about whether it’s best to pay off your mortgage in full or continue to carry the debt. In decades past, it was regarded as a rite of passage to pay the balance in full before retiring. However, times have changed, and many soon-to-be retirees choose to continue making payments into and beyond retirement. Curious about the best choice for your needs? Here, we share a few details to consider when deciding whether to pay off your mortgage before retiring.
When to continue making payments
The prospect of paying off a mortgage is exciting, but in many cases, it makes more financial sense to chip away at the debt one month at a time. If retirement is in the not-so-distant future and you’re eager to become debt-free, you may be tempted to do everything possible to own your home outright. However, this isn’t always the best choice: there are several aspects to consider before making a plan for payoff.
If you’re planning to live in the home for years to come while building your retirement savings, it may be the best course of action to continue making monthly payments. While paying off debt can help improve your ability to live off of a fixed income, it’s wise to meet with a financial advisor to formulate a solid plan for the future. In some cases, a modest mortgage payment is worth the monthly expense if it allows you to bolster your savings for expenses in retirement. In addition to saving aggressively, you may benefit from tax-deductible interest when you choose to continue paying your mortgage loan in monthly installments.
When to pay off the loan
Paying off substantial debt like a mortgage loan is a lofty goal, and retirement age can be an excellent time to pay off your home in full. Becoming debt-free is achievable if you have a detailed plan for retirement, including plenty of savings that won’t be affected by paying off your remaining mortgage balance. If your mortgage loan is the only significant debt that you have, it may be a good strategy to pay off the balance so you’ll have a healthy cash flow.
Additional strategies to consider
If you’re concerned about a high interest rate but you’re not in a position to pay off the debt quite yet, refinancing could be a great option to consider. Interest rates for mortgages are still historically low, so if you’d like to explore this possibility, reach out to a lender to learn more.
Paying off a mortgage is an exciting milestone, but the decision should be made on a case-by-case basis.
By Michaela Phillips. Michaela is the Vice President of Mortgage Lending at Guaranteed Rate, Inc. Contact Michaela at 303.579.5517, e-mail firstname.lastname@example.org or visit michaelaphillips.com.