Should You Carry A Mortgage Into Retirement

SHOULD YOUCARRY A

MORTGAGEINTO

RETIREMENT?

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In years past, a majority of retirees did not have a mortgage;they made sure it was paid off before they retired. Fastforward to today with the aging baby boomers and you willfind that almost 30 percent of retirees still have mortgagedebt. The reason is a combination of factors, including ofcourse, the housing crisis, but also contributing are the factthat many baby boomers bought homes much later in lifethan their predecessors and they put less money down onthe home, resulting in a larger mortgage payment. Inaddition, many baby boomers refinanced when rates werelow and home values were high – taking money out of theirequity and increasing their principal mortgage amount.



The Burden of Housing Costs

Housing costs are one of the greatest burdens on

homeowners, especially those in their retirement years. Aside

from the mortgage, there are property taxes, property

insurance and utilities to pay, not to mention housing repairs

when things go wrong. When you add a mortgage payment

on top of each of these burdens, housing can cause more

distress than health-care costs for aging people. Studies

show that homeowners that do not have a mortgage, yet own

a home, pay less than one-third of the housing costs that

those with a mortgage must pay, which is a significant

difference that can be detrimental to a retirees financial life.



The Benefits of Having a Mortgage

Just as there is a downside to having a mortgage inretirement, there is an upside too. If your mortgage rate islow enough and you can afford the payment without havingto sacrifice in other areas, the interest payment write off canhelp you on your income taxes. This is a benefit for thosethat are simply paying down the balance of the money thatthey borrowed to purchase the house – not the money thatthey took out of their equity down the road to pay for homerepairs, bail their children out of a bad financial situation orto take that dream vacation. Your accountant can help youdetermine if there would be a financial benefit to continueto make mortgage payments while you are retired in orderto reap the tax benefits.



Planning for the Future

The mistake that many homeowners made in the past andare paying for it now in their retirement years is not planningfor the future. When you are working full-time and have adecent income, a larger mortgage payment does not seemto pose a problem. You can easily afford it at the time, butwhat you fail to realize is that those payments continue onfor 20 or 30 years. Chances are you are not going to beworking as hard or making the same income that many yearsdown the road, causing you to struggle with your paymentsduring a time that you should be enjoying your life.



Should you Pay off your Mortgage?

Knowing whether or not you should pay off your mortgage isnot a cut and dry answer. If you do not have any other debtwith higher interest rates, such as credit cards, student loansor auto loans, then yes, you can work on paying yourmortgage down. If, however, you have these other highinterest debts, focus on paying them off before worryingabout your mortgage. If you focus on too many debts at once,you will constantly be chasing your own tail, never gettingahead. Instead, get yourself debt free, with the exception ofthe mortgage and then make extra payments towards yourmortgage as you see fit.



Another factor in determining whether or not you shouldfocus on paying your mortgage off is your proposedretirement income. Oftentimes it is impossible to predictyour retirement income, but you can make a generalassumption based on the type of income that you havelined up for retirement. If you do not think that theincome will cover your mortgage payment and stillallow you to live well, it might be time to figure out away to get the mortgage paid off sooner rather thanlater or to downsize in order to have a mortgagepayment that is more feasible, allowing you to enjoyyour golden years.



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C L I C K H E R E



Justin McHood is Americas MortgageCommentator and has been providing

Mortgage commentary for over 10 years.

INFORMATION PROVIDED BY: JUSTIN MCHOOD

MORTGAGE COMMENTATOR

Information Originally Published:January 5, 2015 BLOWNMORTGAGE.COM LENDER HOTLINE: 888-581-5008

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Should You Carry A Mortgage Into Retirement