Things to Consider When Paying Off Your Mortgage Before Retirement
Though retirees may want to finish off paying their mortgage before retirement, it’s not always the best option to take. Here are a few factors they should consider before making a final financial decision.
As people retire, they may want to move to a less spacious and expensive home that will fit in with their retirement package, hence sell their current home. If this is the case, a retiree can repay their mortgage from the sale rather than exhaust their savings.
Renting out a part or whole house is another factor a retiree should consider before settling a home mortgage. If the rent the tenant pays can pay off the mortgage bill, then the retiree should not be in a hurry to pay off their mortgage in full. They may even have a profit left after paying the home loan from the rent collected.
Clear debts with a higher interest rate
Before deciding to repay a mortgage fully, a retiree should ascertain whether they have any pending debts with a higher interest rate, such as a credit card debt. Paying off a debt with a higher interest rate would save more money in the long run.
Not enough savings in the retirement package
Not everyone’s career comes to an end with them having a secure retirement package to give them a relaxed life. That is why most people continue working even after retiring. It would then be detrimental to their finances to finish paying off their mortgage ahead of schedule rather than adding to their savings. Saving in retirement accounts attracts no or less tax when you finally withdraw, depending on where you save.
Catering for emergencies
Life has unexpected twists and turns. Clearing your mortgage loan from your savings leaves you vulnerable to any financial emergencies that may occur in the future.
No money for future investments
When you use all your savings to settle your mortgage, you miss out on any investment opportunities in the future which may have given you a better return.
Retirees should consider carefully what their retirement package entails. Having an emergency fund, funds to invest when opportunities arise, paying off debts with higher interests are among the factors to deliberate before clearing their mortgage before retirement.
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