How Can I Retire Without Paying a Mortgage?

2.13.20Admit it: Whether you're 35 or 65, the prospect of retiring without a mortgage is an attractive one. No more monthly mortgage payments to your home lender means extra money to spend on having fun in retirement. After years of punctual principal-and-interest mortgage payments, it's the least you deserve, right?

An increasing number of Americans are still carrying a mortgage when they hit retirement. According to a 2019 report from Harvard's Joint Center for Housing Studies, 46% of homeowners ages 65 to 79 have yet to pay off their home mortgages. Back in 1990, that number was just 24%.

Kiplinger’s November article “7 Ways to Retire Without a Mortgage” says that there are a few wise ways to retire without a mortgage. Let’s review these seven ways to retire sans (without) a mortgage.

Make Extra Mortgage Payments. You can pay a few additional dollars with your mortgage payment to save thousands of dollars on interest and reduce years from the repayment period. Look for little ways to cut corners on other household expenses, so you can apply the savings toward your mortgage. If you put an extra $100 a month toward your mortgage, you'll save thousands in interest and retire the loan many years earlier.

Refinance the Mortgage. A good way to reduce the bill on your home loan, is to refinance your mortgage to a lower rate for an equal or greater period of time. That will give you reduced monthly payments and less daily financial strain.

Downsize. When you're supposed to be enjoying the simple life, you don’t really need a formal living room, separate dining room, and several spare bedrooms that you never use. If you don’t use this real estate in your home, think about downsizing.

Move to a More Affordable City. If you can’t find the right place at the right price to retire in your town, consider retiring somewhere cheaper. You will have to make sacrifices. However. what you'll give up in comfort, you'll make up for financially. Home prices aren't the only thing to look at when considering relocation. You also need to weigh taxes.

Find a Roommate. If you rent out a spare bedroom and apply the rent you get toward your mortgage, you can chop years off the time it'll take to repay the loan.

Rent. You can also retire without a mortgage, by selling your current home at a profit and using the proceeds to rent a retirement home. There are some advantages for renting in retirement, including no home repairs, no property taxes, and no equity tied up in illiquid real estate. You will also free to move around as you want in retirement.

Move in with Your Children. What?? OK, the idea of parents retiring to the apartment above their son’s garage is a recipe for disaster. However, maybe not. The number of aging parents moving in with adult children is increasing. A Pew Research Center study found that of the 79 million adults in the U.S. living in shared households, 14% are parents residing in their children’s homes. In 1995, that number was only 7%.

Reference: Kiplinger (Nov. 21, 2019) “7 Ways to Retire Without a Mortgage”

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