Freeing oneself from mortgage debt before retirement has always been the norm. After all, who would want to maintain a major bill monthly when the income is fixed and relatively small? However, fewer and fewer Americans enter retirement mortgage-free. The trend is changing not because logic is no longer fashionable, but rather not extinguishing home loans ASAP actually makes sense these days.
Here are the advantages of retiring before finishing your mortgage.
Almost Historic-Low Mortgage Rates
Unlike in the past, the best mortgage rate here in Utah, Illinois, California, and other parts of America of today doesn’t reach double digits. Before, homeowners were motivated to get rid of home loans because the interest rates were as high as 14%. Now, many Americans enjoy rates of no more than 5%.
Actually, many old-timers have refinanced to snag cheaper interest options even if it meant resetting the clock of their loans. This is why it’s no longer uncommon to find someone carrying a mortgage into his or her 70s.
Easy Cash Access
Paid mortgage balance turns into home equity, which is a kind of illiquid wealth. Normally, you can tap your property’s accrued value when you sell it or apply for a cash-out refinance. Either way, access to funds wouldn’t happen instantly.
On the contrary, maintaining a mortgage with low payment lets you keep more dollars in your pocket every month. With more cash on hand, you’ll enjoy more financial flexibility to cover your living expenses.
A house in a good location is an excellent investment – but it’s not the only one. In fact, it’s ill-advised to put all of your eggs in one basket. If you only invest your money in real estate alone, a housing market crash could wipe out your wealth you’ve been building your entire life.
Instead of trying to pay off your mortgage ASAP, grow your net worth through a variety of investments outside real estate. Other sound alternatives include stocks and precious metals.
Finishing or keeping your mortgage before your retire has unique pros and cons. Study your situation carefully to prepare for the worst and figure out the best that could come out of the choice before pulling the trigger.