Own
a home equals comfy retirement... In theory, you buy a house
when you are 30ish, faithfully make the payments for 30 years and
at age 60 you own your house, free and clear.
But
more often than not, here's what happens. You go from a starter
home to a bigger house, with a larger mortgage. You refinance to lower rate and/ or take some cash out in the process. And at age
60 you're still paying a mortgage 😕
According
to the Federal Reserve Board, over one third of homeowners ages 65 to 74
are still burdened with monthly mortgage payments. The average balances for those mortgages are $118,000 and some might have that amount or more in a retirment
plan. The question, is it worth it to draw on your retirement, and perhaps other investments, to pay off that mortgage? That depends
on your individual situation. Here's an idea on how to decide whether to pay off
your mortgage before retireing:
When to Keep Your Mortgage:
You don't have enough money. If paying off the mortgage
will make you cash poor and unable to cover your bills, then don't do
it. Debt wise, your mortgage is about the best loan you can have.
The money is tied up in other investments. Even if you do have the financial resources to pay off your mortgage,
it doesn't make sense if the money is already invested in assets
that generate income and appreciate.
You have other debt. A
mortgage carries a lower interest rate than most other loans. So if
you're carrying credit card debt or have other high interest debt, pay that off first.
When to Pay Off Your Mortgage:
You have a cash surplus.
If you have extra money sitting in a money market or low interest
bank account, it makes sense to use it to payoff a higher interest rate
mortgage. No mortgage means your monthly bills are lower too.
You have access to a home equity loan. You don't need a lot of cash on hand, if you have access to money if you need it for a major expense, such as a medical bill or home improvement. You also have a backup option, later on, of taking out a reverse mortgage which Rockland Financial could help with if need be.
You're looking for peace of mind.
Paying off your mortgage is like making a risk-free investment, with no
management fees. Knowing your house is paid off free and clear could help you sleep
better. However, as a homeowner you still pay real
estate taxes, insurance, utilities and maintenance. But you can delay repairing a
cracked window or chipping paint a lot easier than you can put off a bank.
You want to set up a comfortable nest egg.
A house is a large asset. It's yours to live in, share or leave to your children. If you decide to downsize, then that profit from the sale of your
house goes to you and not the bank or the government, thanks to favorable
tax treatment of capital gains from a primary residence.
*Source- US News & World Report/ Yahoo.com
Rockland Financial is your one stop Real Estate source.
Refinancing or buying a home, we will get you the best mortgage financing available.
Looking to sell your home, we will list and market your home to ensure the highest price possible.
Looking to buy a home, we will help you find the home your looking for that best fits your needs.
Whatever it is we can help, contact us anytime.
Juan-Diego Currea - Broker
