When my dad retired almost 10 years ago one of the first things he did after his retirement party was pay off his house. Now 10 years into his retirement he has the security of knowing that his home is paid off and will not have to worry about trying to make a mortgage payment. Not having a financial burden of a mortgage is just one of the many reasons you should pay off your mortgage before retirement, here are few more reasons why paying off your home is key in helping you enjoy your retirement.
Having equity will increase your mobility and choices in retirement
Having a mortgage payment can really tie you down. Not having a mortgage allows you to be free to move if you want to downsize or move to better climate. Your location when you retire can greatly impact your lifestyle and what you can and cannot afford to do in your golden years. Once your mortgage weight has been lifted from your shoulders you won’t have to worry about if you can or cannot do something in retirement.
Aggressively paying down your mortgage will help you build equity quickly
By aggressively paying down your mortgage you can open yourself up to savings later on down the road. With a smaller mortgage you could be eligible for more competitive terms and lower interest rates with lenders than if you had a larger mortgage balance. It may also make you a little more financially savvy when it comes to spending money. If you are actively trying to pay down your mortgage it could make you think twice about spending any money.
Peace of mind
For retirees, retirement should be a time of worry free living. Unfortunately that is not the case. But if retirees eliminate their mortgage payment that is one less bill, one less worry that can plague a retirement plan. Consider just one issue as you age, your health. Many retirees who have seen their health benefits shrink, have also had to deal with the increase anxiety of how will they be able to afford to pay these medical bills. Eliminating your mortgage can help give you the ability to save more incase a health issue should arise.
It can give you more options later on down the road
Paying off your mortgage sooner rather than later can save you money and also give you options to move easier than if you still have a balance on your mortgage. It also helps when it comes to a reverse mortgage. In case you didn’t know qualifying of a reverse mortgage is based on your age, (you must be 62 or old) and also the equity you have built up in your home. That means the more equity you have available in your home the more you can receive from the reverse mortgage loan. While you can still receive a reverse mortgage with mortgage balance, you just are required to pay off the balance before you receive any equity from your home.
How to pay off your mortgage quicker
Refinance into a lower rate – Mortgage rates are at record lows. Rates have not been this low EVER. Refinancing to a low rate can save you a boat load each year.
30 year mortgage term – 15- year mortgages can have a higher payment that may not be best for your budget.
Round up your payments – If your payments are currently at $874, round up to pay $900 or even $1,000 if you have room for it in your budget. Paying that little extra each month can help you reduce a year or more off your mortgage.
Accelerated mortgage payments – If you get paid every two weeks this works perfectly for you. Start making your mortgage payments every two weeks. Split your mortgage into two payments that you make each time you get paid. At the end of one year you will have made an extra payment to your mortgage, helping you to pay your mortgage off faster.
Kristen Curzytek is a writer for the One Reverse Mortgage blog. One Reverse Mortgage is the largest retail reverse mortgage lender in America. Check out the One Reverse Mortgage calculator today to see how much you can qualify for.