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  • Writer's pictureSara Dalicandro

Should you delay retirement so you can pay off your mortgage?

Paying off your mortgage before you retire can give you financial freedom in your golden years. Pushing back your retirement date is one way to achieve that goal, but it’s not right for everybody and it might not be necessary.

Pros and Cons of Delaying Retirement

Peace of mind is priceless. If you don’t have to worry about mortgage payments when you’re retired, you’ll feel comfortable spending money on other things, such as travel. You’ll also be better equipped to handle unexpected bills for things like medical care or home repairs.

If you’re in good health, you like your job and you would only have to push back retirement by a few years, working a bit longer might not be a problem. If you’re in poor health, or if you’re unhappy with your job and longing to leave, continuing to struggle could take a toll on your physical and mental health.

Ways to Pay off Your Mortgage Without Delaying Retirement

If you have a significant number of years left before you reach retirement age and/or you have financial flexibility, you might be able to eliminate your home loan and still retire when you’d like. There are several ways to do that.

One option is to pay off the principal on your loan ahead of schedule. You can pay a bit more each month or put money that you receive from a work bonus or a tax refund toward your mortgage.

Another strategy is to pay half of your regular mortgage payment every two weeks. Since there are 52 weeks in a year, you’ll make 26 half-payments or 13 full payments, each year. Making one extra payment per year can chip away at the principal and save you money on interest without straining your budget. Before you make extra payments, find out if your lender charges a prepayment penalty.

Refinancing to a loan with a shorter term can let you pay off your house faster. Your monthly payments will most likely go up. The amount of the change will depend on your balance and interest rate.

If you refinance and lower your interest rate, you’ll spend less each month and pay less in interest. You’ll then be able to save more for retirement or pay more than the balance due every month and eliminate your mortgage ahead of schedule – as long as there’s no prepayment penalty.

If you have a significant amount in savings, or if you receive a large sum from an inheritance or another source, you can pay off a chunk of your mortgage, then have the lender recast the loan. It will recalculate your monthly payments with the same repayment term and interest rate that you currently have, which will result in lower monthly payments.

Another option is to downsize. If you’re an empty nester and most of the bedrooms in your house are sitting empty, you can move to a smaller, more affordable home and not have to worry about paying off a large mortgage balance.


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