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It is often thought of as being a big financial achievement to pay off your home mortgage before you retire, but in many cases, you can still retire in comfort without having paid off all your housing debt. With some low mortgage interest rates, it can be a more sensible financial decision to carry on making the payments once youu2019ve retired, and here are a few other examples of when it might make good sense to keep your mortgage into retirement:<br>
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It is often thought of as being a big financial achievement to pay off your home mortgage before you retire, but in many cases, you can still retire in comfort without having paid off all your housing debt. With some low mortgage interest rates, it can be a more sensible financial decision to carry on making the payments once you’ve retired, and here are a few other examples of when it might make good sense to keep your mortgage into retirement:
• If your investments earn you more than what you pay on your mortgage: It’s always important to consider this carefully and to have a professional mortgage broker help you with the calculations, but if your investment portfolio is earning you more than what you’re paying as interest on your mortgage, then you could still be ahead with your finances if you continue with the payments into retirement.
• If paying off your mortgage would involve using your savings: Your savings are an important part of your retirement, and it simply makes no sense to use them up to pay off your mortgage and be left with next to nothing to enjoy your retirement with. If you have money set aside for emergencies, and can live comfortably from other earnings, then that’s of course a different story. However, all it takes is for one emergency expense, such as a new roof or car, and you could be forced to take on a higher interest debt which would cancel out the benefit of having paid off your mortgage.
• You have other debts with a high rate of interest: If you have more than one debt, it would make good financial sense to pay off the one with the highest rate before you prioritize your low rate mortgage. • If you save elsewhere, you might qualify for a tax deduction: Taxes should always be at the forefront of your mind when making financial decisions, especially with the recent changes to mortgage interest tax deduction. You may no longer be able to deduct mortgage interest due to the increased standard deduction, and if you don’t have enough deductions, you can’t itemize. That said, you might qualify for a tax deduction if you add money to your retirement accounts.
It might also be worth considering whether your decision to pay off your mortgage when you retire, is one that you’re making to give yourself peace of mind, in which case it might not necessarily be the most financially sound one. Going into retirement with debt is probably not a nice thought for anyone, but it’s important to try and think logically about your decision, to avoid losing out. If in doubt, speak to your mortgage broker or a financial advisor who can help you to figure out what makes the most financial sense for you and your circumstances.
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