Prepaying a Mortgage as Retirement Option, Yah or Nay
As kids we are told to start saving for retirement and it will come quicker than we think. The number one thing many will say to purchase, especially now that the real estate market has turned around is to buy a house. Most will take out a 30 year loan to purchase their first home and if they don’t sell before the mortgage is paid in full, they owner may refinance once if not twice for many various options.
However, as we age, we will begin to focus more on our retirement days before us and begin to focus on retirement income planning. Many people assume that once retired they will have lower expenses because the retiree will no longer be saving for retirement. But is this really true? What many don’t think or understand is that in today’s real estate market, once a person retires, this retirement actually leaves them more financially stressed as they still have a monthly mortgage and possibly even consumer debt but no longer are receiving a monthly paycheck.
When looking into paying off a mortgage before or while in retirement, there are a number of factors the retiree or their family must think about such as the person’s personal situation, their financial assets and mortgage features. A very large factor to consider when paying a mortgage off early, is too be sure that there are no pre-payment penalties. Another factor is the emotional connection with the home. If a retiree is emotionally connected to the home, they may choose to pass in this home and not encumbering on the family to continue to pay the mortgage.
Working with a financial or retirement planner is the most appropriate to advice on whether it is in the retiree’s best interest to pay off a mortgage early as each situation is different. There are other options a retiree may consider while in the process of finding the best option for them. A few of the options include a reverse mortgage or pre-payment of the principal methods. For more information on how either of these options work, please consult a financial or retirement planner.