For most people, the biggest monthly bill is their mortgage. They pay a significant amount for thirty years (usually) until their home is paid off. However, more and more people are trying to pay off their home quicker so that they have some extra money to enjoy during their retirement years. Most people don't want a mortgage looming over their heads as they quit their jobs to retire. That being said, it isn't always the best idea to pay it off too quickly, so it is important to weigh the pros and cons to figure out what is best for you and your family.
Here are some reasons why you should pay your mortgage off fully before you retire.
- Debt can be stressful. Owing money, especially the large amount owed on a home, can cause a lot of worry and anxiety. Those who are weighed down by the amount of money that they owe may struggle to sleep at night, worrying about financial burdens. Paying the mortgage off at an accelerated yet manageable rate can reduce this emotional toll significantly.
- Retiring without a mortgage can be a relief to the budget. As you retire and quit working, you are going to have to figure out how to live with less. You aren't going to be getting a paycheck every month. Instead, you are going to have to focus on living within your means so that you can enjoy this time in your life. Your money will go much further every month, without your expensive mortgage to pay.
- You can save money by paying your mortgage off. Even if you are able to cut a few years off of your mortgage, the amount of money that you are saving may be surprising. You will save thousands (and even tens of thousands) of dollars in interest just by paying off your mortgage a few years early.
Here are some reasons why you shouldn't pay your mortgage off fully before you retire.
- If you can't afford it. If you are living paycheck to paycheck, you might not be able to afford to pay off your mortgage early. It simply might not be in the budget to do so. It is much better to retire with a mortgage than overwhelm yourself by trying to find extra money to put toward the mortgage.
- You need to have savings too. If you put all of your extra money into paying off your home, instead of saving for the future too, you may find yourself in financial trouble in the future. All of your money for your retirement will be locked into the equity of your home. Equity is only good if you take out a home equity loan or you sell your home. It won't do you any good during your retirement years.
Though living without a mortgage sounds like a dream, it isn't for everyone. You can't make yourself poor just trying to pay your home off. You won't have anything saved so that you can enjoy the future. However, if you are able to put more money into your home every month, your retirement budget will have a little more wiggle room so you can enjoy life to the fullest.
If you want to talk to a mortgage specialist about whether or not you should try to pay your mortgage off before you retire, don't hesitate to contact a First Savings Mortgage loan officer. We would be glad to talk to you about your options so that you can make the right decision for you and your family. If paying off your mortgage isn't a possibility, we may be able to discuss refinancing so that you can enjoy your retirement without worrying about money.
Please note, by refinancing your existing loan, your total finance charges may be higher over the life of the loan.