Should You Pay Off Your Mortgage Before You Retire?

Paying off the house- I agree

What I never hear anyone say is that to make a $2000 mortgage payment, a working couple has to earn $2600-$2800 BEFORE taxes to make the payment. Our taxes are going to increase more and more no matter who gets elected because of our huge debt and social programs. I can imagine that soon one will have to earn

$3000 before taxes to make a $2000 payment. The idea

of the mortgage interest deduction advantage looks less and

less appealing. I get depressed thinking what I could have

done with the cash that has disappeared from my mutual funds and stock accounts since 2000.

Put me in the small but growing group of people who believe out grand parents idea of paying the house off is a good idea.

Manny of GA @ Jul 14, 2008 20:51:06 PM

pay off your mortgage

The artical overlooked that the standard deduction for persons over 65 is over $6,000 ( 6,250 I believe).

Also--if you oay off the mortgae you still have access to cash/credit shoud you need it by drawing a home equity loan at the time or creating a reverse mortgage. The safer and more flexible method is to pay off the mortgage.

Do you agree?

k.r.murray of NY @ Jul 14, 2008 18:29:21 PM

HOME PAID OFF AT AGE 47 AND 48 OH WHAT A FEELING!

I just want to take the opportunity to say that paying off our house at the age of 47 and 48 is like walking on a cloud everyday of our lives. With the title in the safe and the ability to strut our stuff when we hear friends complaining about the constant monthly payment of a $2,000 to $5,000 mortgage which they will have for atleast the next 15 to 30 years. Well into their 60's and 70's. The thought scared my wife and I to do something immediately and we did. I quit my job! Again, OH WHAT A FEELING! We sacraficed the Esclalade, the 30ft boat and the jetskis, gave up the $10,000 trip, settled on a 3400sqft home for $234000.00 10years ago even though we could have bought the $500000.00 home! Put bonuses in our 401ks instead of buying the new BMW. It is a shame to tell people that paying off your home is foolish, just because you get to write off the interest. WHAT A JOKE AND A LIE! MOST PEOPLE I KNOW DON'T SAVE AND WON'T SAVE! QUEST WHAT? AMERICANS HAVE THE LOWEST SAVING RATES IN THE WORLD, BOTH IN BANKS AND CREDIT UNIONS, NOT TO MENTION THAT 70-80 PERCENT DO NOT PARTICIPATE IN THEIR COMPANY 401K PLAN. FORGET ABOUT USING EQUITY TO INVEST IN THE MARKET,FOOLISH AS CAN BE! NO ONE PREDICTED THE MORTGAGE CRISS, SO HOW IN THE WORLD CAN THEY PREDICT THE MARKET CRISS THAT'S HAPPENING RIGHT NOW. LOSE YOUR JOB AND YOU WON'T BE ABLE TO PAY BACK THE MORTGAGE OR THE EQUITY LOAN. OH YEA! THATS RIGHT, YOU STILL GET TO WRITE OFF THE INTEREST AFTER YOU LOSE YOUR HOUSE! NOW THAT'S A FEELING I CAN DO WITHOUT!

EVAN of CA @ Jul 12, 2008 21:20:09 PM

15yr Buydown

I am a mortgage broker and I offer my clients the option to buydown the interest rate on a 15-year mortgage as an alternate to the 30-year mortgage. It's a better long term plan if you truly want to pay off your home. If for example you can get a 30-year mortgage for 6% but you can buy down a 15-year to 4.75% or lower, it can make much more sense for some people in certain situations to choose the latter.

Five years into the 15-year plan people find themselves with only ten years left to pay off their mortgage and their low rate is saving them thousands over the old 30-year plan. Ten years is something most people can grapple. There is a lot more temptation to refinance and take out equity when you still have 20 to 25 years still to go.

Some people say taking the 30-year loan and making the 15-year payment it better but its a higher rate and not really a good long term plan unless you are exceptionally disciplined and committed to paying it off and don't give in the temptation of making the lower payment. Having the lower payment of the 30-year mortgage show on your credit report makes it easier to qualify for other loans such as cars, credit cards and a second home, so you'll want to take that into consideration when deciding if a 15-year Long Term Plan to payoff your mortgage is right for you.

It's just one more option to review for your own planning.

Tony Baricevic, Broker - Acreditrust Mortgage of CA @ Jun 26, 2008 02:59:56 AM

Getting ready for retirement

I have worked in the mortgage industry and owned my own retail mortgage brokerage for fifteen years. Having a chance to meet with people face to face analyzing their finances has given me a first hand perspective at all levels of mortgagors (folks borrowing the money).

I have had plenty of discussions with people thinking of and planning for their retirement. Think about this. If you are paying on a loan with a balance of $275,000 at 6.25% interest and you only had 25 years left on your loan your P&I payment would be $1,1814.09 per month. Remember this does not include taxes and insurance. We will use $350 per month for taxes and $100 for hazard insurance. The total housing expense is $2,264.09

If you figure that a third of your gross income needs to be allotted toward your house payment. You need to have a continuous monthly income in your retirement years of around $6,860 to easily cover this monthly expense.

If you pay off this loan and own your home free and clear you only have a housing expense of $450 to pay taxes and insurance. Now you should be able to comfortably live on less than $4,500 per month depending on your life style.

That is nearly $30,000 per year of after tax income you do not have to create in order to live comfortably.

Decide for yourself what is best for you. YOU know what your monthly retirement income is going to be. Make your decisions based on what you know.

One way to get ready for retirement and if you plan on owning your home free and clear is to look as a fifteen or twenty year loan. In most cases you get a better interest rate by .25% to .375% by choosing a fifteen year loan (15 year). Keep in mind that every dollar you pay over the interest due goes directly off your principal balance. (communicate with the company servicing your loan) Some times the servicer will not apply extra amounts toward your balance reduction. Be sure you instruct them to deduct the extra amount off your principal balance.

If you compare the better rate of a fifteen year loan vs. a thirty year loan and look at your principal balance say; at the end of seven years you will see that you actually create equity and at a internal rate of return of nearly 8% non taxable. WOW

Be ready for your retirement. Plan ahead. You can do it!

Bill Bitz of CA @ Jun 25, 2008 11:23:24 AM

Security.... period.

Over the passed few months, I've watched what do invest slowly depleiting. Yes the market goes up and down, so I know it will come back. Having my house paid off is forever. It is money invested that cannot be taken away as long as I have insurance. It is an emotional high knowing that loans are paid off- highest interest first of course. Make a plan and stick to it, period. It is the panic that drives commodities. The feeling off security will help the American psyche. Pay it off!

Molly of WI @ Jun 22, 2008 11:29:25 AM