Get Rid of Your Mortgage Before Retiring

Get Rid of Your Mortgage

If you want to retire in peace without the worry of long term bills weighing on
you there are few better ways than by getting rid of old mortgage debt and not taking out
a new one. There are exceptions, of course, as always. If your assets are such that you
are making more by investing than you would lose through debt then you might decide to
disregard this advice. However, there is no substitute for peace of mind and no money
can necessarily buy it. Each individual must make his or her own decisions. Remember
also that under the new Tax Cuts and Jobs Act passed by Congress you usually cannot
deduct on your tax return interest from Home Equity Loans or Lines of Credit.
If you want to start out debt free, here are some ideas.

If you want to start out debt free, here are some ideas.

  • Make Extra Mortgage Payments. By starting early and adding an extra
    few hundred dollars to your mortgage payments every month you can
    decrease your overall obligation substantially and might pay off the loan
    years earlier. Some lenders even have an on-line amortization calculator
    allowing you to compute how much sooner the mortgage would be
    satisfied and how much would be saved.
  • Refinance Your Mortgage But Reduce the Term. To pay off your
    mortgage early using refinancing, you will need a shorter term loan. You
    might reduce the term of a 30 year conventional mortgage to 15 years, for
    instance. This works best if you refinance earlier in the current loan since
    mortgages are front end loaded when it comes to interest. Your monthly
    payments will be higher but you might be surprised. They might not be as
    high as expected.On the other hand, if you have already paid 25 years on a 30 year
    mortgage, you have already paid most of the interest and principal on the
    current loan. In that case, the first strategy of paying more monthly on
    your current loan would make more sense.
  • Downsizing Your Home. Obviously, selling a larger and more costly
    home and moving to a smaller one can give you cash from the first sale
    and might even pay for the second purchase entirely. It is up to you
    whether to downsize recognizing, however, also that there are costs
    associated with a move.
  • Relocate to a Less Expensive Area. When considering a move to
    another location, whether local or out-of-state or even out of country, all
    of the factors including taxes and property taxes must be considered.
    There is also stress associated with a move so you need to weigh the
    options. Also consider property tax rates at your new location. Those who
    intend to move need to research all the factors including the cost of the
    move.
  • Share Housing or Rent. Shared housing works for some as does moving
    to an apartment. However, apartment living does have some downside.
    There is no equity and it is easier to be dispossessed from an apartment
    then from a house. One consideration in getting a roommate is to know
    the person well since there are security concerns and instances of abuse.
    Here are some other possibilities.
  • Moving in With Children or Children Moving in With You. Business
    arrangements with children should definitely be in writing with professional
    advice and considering all the consequences as a Family Agreement but, with
    this said, parents often make satisfactory arrangements with their children
    either paying to add an “in-law suite” to a child’s home or buying properties
    together. The written Family Agreement can deal both with estate and family
    issues and potential Medicaid penalties since rental payment or payment for
    services without a written agreement can sometimes be considered “gifts” that
    disqualify parents for Medicaid. So the important thing to remember is to
    have the Agreement in writing in advance. Sometimes parents pay rent or
    contribute to household expenses. Sometimes they “hire” their children to pay
    for services or care. Sometimes their children pay rent to them. Parents might
    buy an interest in their child’s home or a child buy an interest in theirs.

There are many ways to deal with debt before and during retirement both within and
outside the family. This is where planning ahead can help.

About the Author Janet Colliton

Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.

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