Should you pay off your Mortgage Before Retirement?

Should you pay off your Mortgage Before Retirement? 

Should you pay off your Mortgage Before Retirement?

How do you decide what’s more important financially, paying off your mortgage before retirement, or saving as much as you can for retirement? Unfortunately, there’s no simple answer to this question. Everyone’s finances and goals are different and that means so is their path toward the perfect retirement savings scenario. 

The benefits of paying off a mortgage before retirement 

For some, paying off their mortgage while still earning an income is the peace of mind they need, by eliminating as much debt as possible. However, leaving no cushion in your savings to eliminate mortgage debt could leave you financially strapped and unprepared for unexpected costs down the road, especially medical expenses that might come up as you age. In fact, 78% of Americans admit to being “somewhat” or “extremely” worried that they haven’t saved enough money to retire comfortably, according to a recent survey by Northwestern Mutual Life Insurance Company. 

Not having the financial burden of a house payment during retirement 

You’ll have one less financial worry by paying off your home before retirement. Financial experts recommend you start paying off that house debt at least a decade before you’re ready to retire. You can work toward that goal by making one extra payment a year or paying your tax refund toward your mortgage. 

Reducing the amount of interest that you will pay over the lifetime of the loan

In a case study for the Center for Retirement Research at Boston College, economist Anthony Webb found that the majority of homeowners are better off financially by paying off their mortgage before retirement. Webb discovered that if the same dollar amount was left in a treasury bond or used to pay off a mortgage over a 30-year period, the financial savings would be in mortgage interest. 

The risks of paying off the mortgage instead of saving.

While financial experts agree that it’s a prudent financial move to pay off your mortgage, you also don’t want to do so if it means depleting your savings completely. Once you retire you will likely have a fixed income and your savings is where you’ll need to turn when those surprise expenses come up. 

I’m ready to retire: Can I sell my home and save the proceeds if I have a mortgage?

What do you do when it comes time to retire and you realize your mortgage is weighing you down? Maybe selling your home and putting that extra cash towards your savings, instead of paying off your mortgage is the right idea for you.

The real estate experts at HomeLight advise that you can still sell your home — perhaps to downsize to something smaller — even with a mortgage. You might even find that you can make money to add to your retirement nest egg, by selling your home. You can start your research with Investors Bank (an East Coast bank that has been in operation for more than 90 years) and it’s free online home sale proceeds calculator.

Remember, because your financial situation is as unique as you are, we recommend discussing your plans with a licensed financial advisor before making any final decisions. Whatever you decide, your home doesn’t need to be a financial burden when you retire, with some pre-planning and by being aware of your options. 

Barrington Acquisitions is a proud partner of, and has completed numerous transaction together helping sellers cash out on their old homes, and enjoy a better retirement. Check out our simple 4-step process on how to get your home sold FAST!

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