A comfortable retirement is a blessing! One cardinal rules of a peaceful retirement is to consider paying off your mortgage before quitting the job. Loss of income while paying towards a huge debt can affect you not only physically but mentally.
Paying off your mortgage debt years prior to your retirement can help you keep your retirement savings bucket full, says the Center for Retirement Research (CRR) Moreover, carrying low-interest mortgage debt in retirement is also not a bad idea, added by other experts.
The CRR while citing a data provided by the Federal Reserve’s Survey of Consumer Finances, said, “In 2013, approximately 40 percent of U.S homeowner’s (up from 32 percent, 2001) ages 55 and plus hadn’t released their mortgage payments.”
Prior to 2008, when the home prices were higher, many homeowners were confident to take big loans, through cash-out refinances. However, when the housing market collapsed, millions of households were left “underwater.”
After the crash, “51.6 percent of homeowners were at high-risk of having a low standard of living in their retirement phase,” just because of their huge mortgage debt.
According to statistics provided by the National Association of Realtors (NAR), the average home prices increased (15 percent) from $197,100 in 2013 to $232,200 in 2016.
He further said, “It is not necessary to be 100 percent debt free when your income is large enough to meet all your expenses and still leave a cushion.” Once the debt portion remains smaller than the households home value, he or she will better able to sell. The other option is downsizing, in which selling the current home and using the cash proceeds to buy a cheaper home with a smaller mortgage. Remember, low-cost homes offer low property taxes and maintenance charges.
As a word to the wise, if you are thinking of retiring shortly, take a good look at your finances and see if paying off your mortgage will benefit you.
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If you are interested in any of the above services, visit our website United Counselors and click ‘Contact Us Now’ form.