The common American home-buyer usually takes out a 30-year fixed rate mortgage, and this home loan can last well after they retire. According to statistics in 2012, 35 percent of people of retirement age retain housing debt when they hang up their coats at work.
You may be seeing retirement on your horizon, and you still have a mortgage on your Nashville home. Paying down your mortgage before you retire is a good decision. Mortgage Investors Group explains why.
Less Stress in Retirement
Financial advisers and experts suggest that when you find yourself retiring soon, you can pay down your home loan instead of piling up your retirement savings in your 401(k). By paying down your home loan, you free yourself later on from the worry, hassle, and trouble that a home loan in retirement can bring. You will enjoy your retirement more then.
Keep Your Retirement Savings Safe
You also prevent payment of your home loan using your retirement savings. While having a few debts when you retire can also be good, a home loan can prove detrimental in retirement. When you pay it off with a lump sum, you risk outliving your significantly reduced savings.
More Savings, More Income
Paying down your mortgage before you retire also brings some other benefits. You save more on the interest that you have to pay on your home loan. You also reduce your monthly expenses once you fully pay off the loan, giving you a larger net income and allowing you to save on your 401(k) more.
Remember Your 401(k)
You still have to contribute to your 401(k). You may be wondering how you can pay your home loan and increase your savings. Well, you should have already been saving up before retirement. A person who began to save on a 401(k) early would have significantly built up more savings than the one who started late.
When retirement is in sight, you better pay down your home loan, but remember your 401(k) as well. When you successfully balance both, you can have a memorable and enjoyable retirement.