Less Common For Retirees to Pay off Mortgages (2024)

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Less Common For Retirees to Pay off Mortgages? ›

The survey, "Retirement and Mortgages," by national mortgage banker American Financing, found 44 percent of Americans between the ages of 60 and 70 have a mortgage when they retire, and as many as 17 percent of those surveyed say they may never pay it off.

Key Takeaways. Paying off a mortgage can be smart for retirees or those who are just about to retire if they're in a lower income tax bracket, It can also benefit those who have a high-interest mortgage or who don't benefit from the mortgage interest tax deduction.

According to Census Bureau data, while nearly 63% of owner-occupied housing units are owned free and clear for homeowners age 65 and older, less than 28% of homeowners below retirement age have paid for their homes in full.

Mortgage debt remains uncommon among homeowners age 65-plus relative to their younger counterparts; in fact, the fraction of homeowners age 65-plus who had a mortgage in 2022 (34 percent) was less than half that of homeowners under age 65 (70 percent) ³.

To O'Leary, debt is the enemy of any financial plan — even the so-called “good debt” of a mortgage. According to him, your best chance for long-term financial success lies in getting out from under your mortgage by age 45.

Key Takeaways. The money you save from not paying off your mortgage early can give you more financial flexibility. Investing extra funds can potentially earn higher returns than you would save on mortgage interest. With extra cash flow, you can work toward other financial goals, such as saving for retirement.

Paying off your mortgage early will rev up your wealth building.” However, one of his more controversial pieces of advice revolves around not paying off your mortgage early, even if you can do so. This advice counters the traditional wisdom of becoming debt-free ASAP.

This problem has become more pressing over the years. Half of the retired homeowners who were born in the early years of the baby boom wave are still making mortgage payments. They are in a very different situation than their parents' generation when the majority of retirees owned their homes free and clear.

No age is too old to buy or refinance a house, if you have the means. The Equal Credit Opportunity Act prohibits lenders from blocking or discouraging anyone from a mortgage based on age. If we're basing eligibility on age alone, a 36-year-old and a 66-year-old have the same chances of qualifying for a mortgage loan.

The model predicts about 45% of American households will run short of money in retirement. The outlook for single women was even more bleak, with about 55% of them seen as at risk in retirement, compared with 41% of couples and 40% of single males, Morningstar found.

What percentage of retirees are debt free? ›

Nearly 65% of Americans 65 to 74 held debt in 2022, compared to about half of seniors 75 and older who held debt.

According to the firm Personal Capital, the average mortgage holder in their 60s has a mortgage balance of $243,000. Experian's Annual State of Credit report found Baby Boomers aged 57-75 carry an average mortgage balance of $198,000 while those 76 and older have a smaller average balance of $163,000.

Even with low-rate mortgages, the bulk of monthly payments go toward interest, not principal, sometimes for 10 or more years. Thus, it's not uncommon for Americans to want to pay that debt down as fast as possible. In fact, according to Census Bureau data, nearly 40% of Americans already have.

Paying off your mortgage may make sense if: You have substantial retirement savings, especially if the funds you'd be withdrawing are in a taxable account and are not earning much interest. You're downsizing.

British people are buying their first homes at the age of 36, hitting their peak earnings at 47 and paying off their mortgages by 61, according to data from the Office of National Statistics.

And we'd certainly pay off our mortgages, credit cards, and car loans before we retire. But that's not always possible.

Mortgage and credit card debt, however, are a cold reality for over a quarter of retirees, according to new research from the Nationwide Retirement Institute.

There are good reasons to own a home after retiring, but there are also plenty of arguments for renting. Renting can be less expensive as you skip the burdens of property taxes and maintenance costs. However, owning can be less stressful since you don't have to worry about a landlord raising your rent.

Make a note to alert your accountant come tax season: You'll no longer have mortgage interest to deduct on your tax return. Watch your credit. Keep tabs on your credit score; after your mortgage loan is removed from your credit history, your score may drop slightly.

Putting money in savings, even with today's very low returns, may be better than paying down a mortgage. Paying down might result in a better 'return' than an alternative investment, but houses aren't liquid—they aren't a source of immediate cash—especially in today's market.