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Reasons to Pay Off Your Mortgage Before Retirement

For people who are wondering if they should pay off their mortgage before retirement, Washington Post finance columnist Michelle Singletary writes, “Yes, you should pay off your mortgage before retiring.” 

In this column Singletary answers a question from a reader who wondered about following commonly-held advice about why one should not pay off a mortgage early. While Singletary lays out her reasons to pay off a mortgage, part of the purpose of the column is to say that you cannot take commonly-held advice without considering the specifics of your situation. Because while she advises paying off mortgages early, she wouldn’t advise doing so if it means you will be “house rich and cash poor.”

Singletary herself notes that she and her husband make additional principal payments on their mortgage and they refinanced to shorten the length of their loan. So one part of paying a mortgage early may involve doing some retirement planning in advance (as opposed to using a large chunk of savings to pay it off all at once).

Singletary writes that one of the primary reasons for paying off her mortgage is the desire to be free of that large debt.  And the psychological advantages of paying off debt can translate into financial advantages as well. Eliminating mortgage payments means you have funds for the other expenses you will have in retirement.

And the column addresses the notion that one should not pay off a mortgage in order to keep a tax deduction:

“About that tax deduction. It’s just that: a deduction, not a tax credit. A tax credit reduces dollar-for-dollar the taxes you owe. A deduction eliminates only a percentage of the tax. If you don’t have a mortgage, you may pay more in taxes — but not as much as you would have to pay in annual interest on the home loan, especially in the early years.”