Retirement and still owing on a mortgage?

[JDgreen227]

There have been several threads here recently about getting prepared for retirement, but I don't think anyone has mentioned choosing to do so and still owing a big chunk on your home mortgage. My wife and I may be one of the few folks who did that, just before retiring at age 51 and 50, we took out a home equity loan for $140 grand to build onto our house, which had been paid for prior to that. We rolled over two vehicle loans into that sum and aside from normal living expenses, the $1400 monthly payment was our sole major debt for the past eight years. One more year and we are done with the payments.

I have read many times in the past that for most people, retiring and still owing a lot of money on your home mortgage can be a huge mistake, but we had enough equity built up (back in 2002 anyhow) our assessor told us the morgage loan was only about half the valuation of the property after making the addition (which we did ourselves) ...so we felt reasonably safe borrowing the money. Any comments?

 

[bp fick]

There are so many variables. For those whose retirement income is less than their working income, it absolutely means something has to give. Not having a house payment? Priceless.

 

[Travelover]

I don't think it really matters. The important thing is the big picture - how much income do you have in retirement and how much are your ongoing expenses? Are your pensions secure, or will you struggle if the pension defaults to the pension benefit guaranty corporation? Are your investments diversified or will you suffer if one investment takes a major hit (think Enron)?

I retired early with a mortgage, but it was small enough that I could comfortably pay it off from my investments.

 

[Jimbrown]

My stradegy was to have enough to retire and just use my social security to pay the mortage. I look at it as a free mortage payment.

 

[two_bit_score]

There have been several threads here recently about getting prepared for retirement, but I don't think anyone has mentioned choosing to do so and still owing a big chunk on your home mortgage. My wife and I may be one of the few folks who did that, just before retiring at age 51 and 50, we took out a home equity loan for $140 grand to build onto our house, which had been paid for prior to that. We rolled over two vehicle loans into that sum and aside from normal living expenses, the $1400 monthly payment was our sole major debt for the past eight years. One more year and we are done with the payments.

I have read many times in the past that for most people, retiring and still owing a lot of money on your home mortgage can be a huge mistake, but we had enough equity built up (back in 2002 anyhow) our assessor told us the morgage loan was only about half the valuation of the property after making the addition (which we did ourselves) ...so we felt reasonably safe borrowing the money. Any comments?

Well, it worked out for youu, so far. Glad it did and hope it continues to until it's paid off and you are debt free.

 

[JDgreen227]

I don't think it really matters. The important thing is the big picture - how much income do you have in retirement and how much are your ongoing expenses? Are your pensions secure, or will you struggle if the pension defaults to the pension benefit guaranty corporation? Are your investments diversified or will you suffer if one investment takes a major hit (think Enron)?

i retired early with a mortgage, but it was small enough that I could comfortably pay it off from my investments.

We were fortunate in that we both had a traditional pension and that our major source of income was reasonably safe...should have mentioned that.

 

[Alan L.]

Depends on how the numbers work out. If the mortgage payment fits into the post retirement budget, or it can be paid off, fine. Its comes down to evaluating the sure thing of paying your mortgage down vs investing the money and paying it off lump sum later.

 

[JDgreen227]

Depends on how the numbers work out. If the mortgage payment fits into the post retirement budget, or it can be paid off, fine. Its comes down to evaluating the sure thing of paying your mortgage down vs investing the money and paying it off lump sum later.

Good point...our mortgage was a fixed rate 6 1/4 % over 30 years and our 457 plans were paying about 5.5 % yearly back then, I figured it best to prepay the mortgage as much as we could instead of investing...worked out well as current interest earnings on the 457 plans has decreased to just over 4 %.

 

[ultrarunner]

Should have the mortgages paid off if I stick to plan... not having any employer pension is my motivation.

 

[not2old]

Mortgage interest on your home is not normally deductable in Canada and almost all income is taxable. I'm not sorry I worked at paying it off. Having been self-employed, there is no pension plan and I'm presently looking at the purchase of a couple of cheap one bedroom apartments for income rather than leaving it in the bank at 1.2% interest. I expect to buy a couple more when we sell mom and dad's house and I get my share. I know too many people who took advice from financial advisors who wish they hadn't. I've done OK ignoring them.