Anyone who has gone through the process of mapping out their retirement knows there can be a lot to keep in mind. Saving, investing, anticipating medical costs, and making sure you have enough tucked away for years to come is just the start. One question many people overlook is: “Should I pay off my mortgage before I retire?” The answer is more complicated than you may think.

Maintaining a Mortgage in Retirement

As with any type of investment, you may find that holding onto it is a wiser move than selling—or, in this case, paying it off. Here are three considerations that may make you think about carrying that mortgage into retirement.

1. Opportunity Cost

Opportunity cost is the difference between spending your money one way versus another. Let’s say you have $300,000 set aside to pay off your mortgage. Sure, it’s tempting to stop making a monthly payment, but what if that money could be used in a better way? What if rather than using those funds to pay off your mortgage, you instead decide to invest that sum of money where it can potentially grow even larger? Yes, your house may appreciate (which could potentially mean a significant gain if/when you sell), but you should consider all your options for that lump-sum of money, and you should think about how it can best be used to yield the most value.

2. Eradicate (Other) Debt

Continuing off the previous point, that large sum of money could be used to pay off other kinds of debt. Before you pay down your mortgage, you may find that any extra cash might be better suited to paying off other kinds of debt that carry higher interest rates—especially non-deductible debt, such as credit card balances.

3. Make Your Mortgage Work

Some homeowners benefit from a mortgage interest deduction on their taxes. Under the 2017 Tax Cuts and Jobs Act (TCJA), mortgage interest deductibility is limited to mortgages up to $750,000 ($375,000 if married filing separately) in principal value. So, taking a mortgage interest deduction on your taxes might be a viable option for you.

Here's how it works: The amount you pay in mortgage interest is deducted from your gross income, which reduces your federal income tax burden. But remember, the further along you are toward paying off your mortgage, the less interest you’re paying. If you’re unsure if you’ll be able to take advantage of this mortgage benefit, it’s best to consult your financial professional.

Retire Your Mortgage

Though there are some benefits to hanging onto your mortgage, there are also some pretty good reasons to simply pay it all off. Here are three:

1. Don’t Throw Your Money Away

Your monthly mortgage payment may be a large part of your available capital, especially in retirement. Eliminating unnecessary costs can significantly reduce the amount of cash you need to meet monthly expenses. Essentially, without your monthly mortgage payment, you may find that you need significantly less in retirement than what you originally thought.

2. Uninteresting Interest

Depending on the length of your mortgage term and the size of your debt, you may be paying a substantial amount in interest. Paying off your mortgage early can free up that money for other, better uses. True, by doing so, you may lose out on the mortgage interest tax deduction. But remember what was mentioned above: As you get closer to paying off your loan, more of each monthly payment goes to principal and less to interest. In other words, the amount you can deduct from taxes decreases, and the less beneficial this deduction becomes.

3. Home Is Where the Heart Is

There’s a value to your home beyond money. It’s where you raised your children and made fond memories, and you may want it to remain in the family. Paying off the mortgage may help make your home part of your legacy, turning it into something you can pass down to heirs. After all, some things you just can’t put a price on.

Paying your mortgage off early is a major financial step. Whether you decide to do it or not should come with careful consideration. Speak with a trusted financial advisor to help you determine if this is the right move for you.


This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

Devone McLeod

Devone McLeod

Financial Advisor

CFP®, Series 7, 63 Securities Registrations1 Devone strives to help families achieve their retirement goals by creating custom strategies designed to avoid costly mistakes, fund lifestyle goals, and eliminate financial worries. His financial services experience dates to 2013, including progressively advanced roles at Key Bank as Management Associate, Relationship Manager, Wealth Associate and Assistant Vice President. Devone joined Reby Advisors in 2017 and now advises...Read More