Keeping a Mortgage After 65: A ‘No Brainer’ or a Big Risk? (2024)

FAQs

At what age should you no longer have a mortgage? ›

To O'Leary, debt is the enemy of any financial plan — even the so-called “good debt” of a mortgage. According to him, your best chance for long-term financial success lies in getting out from under your mortgage by age 45.

There may be good reasons to pay off your mortgage. It can save you thousands of dollars in interest, depending on the current size of your debt, and give you peace of mind that no matter what happens in the future, you own your home outright.

In 2022, researchers found that just over 40 percent of homeowners older than 64 had a mortgage, a jump from roughly 25 percent a generation ago. Ultralow mortgage rates were a big driver of the increase, said Jennifer Molinsky, project director of the center's housing and aging society program.

Carrying a mortgage into retirement allows individuals to tap into an additional stream of income by reinvesting the equity from a home. The other benefit is that mortgage interest is tax-deductible. On the downside, investment returns can be variable while mortgage payment requirements are fixed.

But with nearly two-thirds of retirement-age Americans having paid off their mortgages, it means that the average age they have gotten rid of that debt is likely in their early 60s. Stats from 538.com, for example, suggest the age is around 63.

"Shark Tank" investor Kevin O'Leary has said the ideal age to be debt-free is 45, especially if you want to retire by age 60. Being debt-free — including paying off your mortgage — by your mid-40s puts you on the early path toward success, O'Leary argued.

Key Takeaways. Paying off a mortgage can be smart for retirees or those who are just about to retire if they're in a lower income tax bracket, It can also benefit those who have a high-interest mortgage or who don't benefit from the mortgage interest tax deduction.

Survey finds that 44 percent of Americans are still paying for their home when they retire. Some retirees living on a fixed income still face a monthly payment on their homes.

As mentioned, $500,000 can last for over 30 years if budgeted correctly. However, there are a number of caveats to this, including how long you need your retirement savings to last you.

Absolutely. The Equal Credit Opportunity Act's protections extend to your mortgage term. Mortgage lenders can't deny you a specific loan term on the basis of age.

How many people retire debt free? ›

Average Retirement Debt: The Numbers

Three in 10 devote more than 40% of their monthly income to debt and a quarter have a mortgage with more than 20 years remaining on it. More than half say they intend to enter retirement debt free, but only one-quarter of retired Boomers actually are debt free.

The leap in interest rates of the past two years means that an old fixed-rate loan should be thought of as one of your most valuable assets, rather than a deadweight loss you have to pay the bank every month. Getting one's head around the idea that money you owe to someone else is an asset is hard.

There are good reasons to own a home after retiring, but there are also plenty of arguments for renting. Renting can be less expensive as you skip the burdens of property taxes and maintenance costs. However, owning can be less stressful since you don't have to worry about a landlord raising your rent.

Key Takeaways

Taking money out of your 401(k) to buy a house robs you of compound growth and is never a good idea. There are two ways to buy a house using money from a 401(k): early withdrawal or a loan. Early 401(k) withdrawals come with penalty fees and taxes if you're younger than age 59 1/2.

If you pay off your mortgage and debts before retiring, you could live on smaller portion of your preretirement income. Based on this rule, if your annual preretirement income was $100,000, you need $80,000 a year in retirement to cover your expenses.

You want to save on interest payments: Depending on a home loan's size, interest rate, and term, the interest can cost hundreds of thousands of dollars over the long haul. Paying off your mortgage early frees up that future money for other uses.

40% of Americans Pay Off Their House — Are They Doing Better Financially? For most Americans, a home mortgage is the biggest financial obligation they will ever have. A traditional mortgage spans 30 years and is often in the hundreds of thousands of dollars, so the interest charges can be enormous.

One number should jump out at you: Total interest paid on a 30-year fixed mortgage is a lot! Nearly 2.5 times what the original loan amount was and almost double the value of the home. By comparison, you'll spend $120,000 more over 30 years than you would for the same home with a 15-year fixed mortgage.

Homeowners typically make their normal monthly mortgage payments and expect to pay off their homes over 30 years.