Mar 29, 2021

Paying Off Your Mortgage - Does It Make Sense

Most people believe it is a good idea to have a home paid off by the time you retire.  However, with interest rates so low, it may not be a good strategy for everyone.  It is possible to get an interest only loan today usually for up to 10 years.  And, while it is true, interest only means that nothing is going to pay off the principal, the payment is likely to be half what you would be paying if the loan was fully amortized.  And, since very little money goes to pay off the loan anyway until the last 10 years of a 30 years mortgage; maybe just paying interest for 10 years makes sense to provide more spending money in retirement during the years while you are still healthy enough to travel and live a great life.  

Ultimately, odds are that 10 years from now, you may choose to move anyway.  That could be the time to downsize into a retirement community in a low cost, low tax state.  And, or if you have a lot of equity in your home, you could do that now to eliminate a house payment altogether.  

Of course, everybody's financial circumstances and life spans are different.  A good rule of thumb; though certainly not fool proof is to take the average of your parents ages when they died and assume you will live that long.  Not everybody lives to be 90.  We know that because on average men in the United States live to be 76 and women 81.  

So as you consider your financial decisions plan to enjoy life.  If you need more money to live now, just maybe paying off your mortgage is not a good idea.  The day will come when you won't be able to travel.  That will be the time when staycations and living in a great community with amenities at your doorstep and family nearby will be the most important.  Talk to your accountant to devise the best financial plan for you.