Many of my friends are wondering if they should pay off their mortgage before they retire. Today, people are holding onto their homes because they have low interest rates. As a result, the housing market does not have a great deal of inventory and homes are selling at a premium. There are many arguments for not paying off your mortgage, but do things change when you enter your late fifties and sixties? Is there a benefit to being mortgage free?
Who Has Paid Off Their Mortgage?
According to the U.S. Census Bureau, over 63% of people 65 and older have paid off their homes. Mortgages are considered “good debt,” but as you age it may be tempting to be debt free. Kevin O’Leary from Shark Tank, takes this idea a step further. He believes that even if you’re younger and starting out, you should focus on paying down debt, from student loans to your mortgage. Afterward, take that extra money and invest and build a solid financial platform. New tax laws are not as favorable for write-offs and it’s possible that the old write-off benefits no longer truly apply. I have friends that have paid off their mortgage and others who subscribe to the fact that this is the cheapest money they can borrow. They simply plan to sell their house at a high and hopefully reap the future benefits.
Emotional Reasons
As you enter your late midlife, you have already sacrificed both time and money for your children and your home. You get to a point where you are over it all. Not carrying the weight of debt can be extremely appealing. It is at this point that some financial advisors support their customers’ wish to pay off their mortgage. Sometimes life is not just about the numbers game. There may be psychological reasons that are just as important.
How To Start Paying Your Mortgage Down?
First, check with your lender to see if there are any pre-payment penalties. Many banks now have an online option to make an extra payment towards your principal. This is important to ensure, that your extra payment goes to principal not interest. As this article states on SmartAsset.com, paying down your principal can save you thousands and thousands of dollars.
Refinancing is another method used to reduce a mortgage. However, at this time, the interest rates aren’t favorable for this type of strategy. The mistake we made when refinancing was the term. We lowered our monthly payment but stayed with a 30-year loan. Converting to a shorter term may have been the best strategy, as we could have shaved off at least ten years. Now our mortgage seems never ending and I for one, am looking forward to eliminating our monthly payment.
Early Mortgage Payoff Calculator
How much should your extra payments be? This mortgage payoff calculator can help. You can pay extra per month, but don’t go for perfection. Just a little bit towards principal can save you time and money. As I used this calculator, I discovered that paying $2,000 extra per month would reduce my mortgage to ten years. That’s not going to happen, but we will begin by sending just a little bit to reduce the amount of interest we will ultimately pay.
So What Is The Right Strategy?
The right strategy to pay off your mortgage is one that feels right for you. You will encounter many different opinions on the subject, but remember that you are the only person who has to live your life. My husband and I have really been integrating our vision of our future with our desire for financial independence. We are not planning to retire, but while we are healthy and strong, we’d like to travel more and use any discretionary income we may have for life experiences and not a mandatory monthly payment. Choice is becoming increasingly important and I feel the clock ticking. In the end, I know we will downsize before any payoff can occur!
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