Most people would be better off not having mortgages in retirement. Relatively few will get any tax benefit from this debt, and the payments can get more difficult to manage on ‘retired income’. But how do you pay off your mortgage before retirement?
You need a good Plan B to ensure you don’t wind up house rich – and cash poor.
Plan B should begin with an ‘attack’ on other loans.
You need a good Plan B to ensure you don’t wind up house rich – and cash poor.
Plan B should begin with an ‘attack’ on other loans.
The cheapest form of debt you will incur
Mortgage loans are probably the cheapest form of debt you will incur. Before you even look there, you should consider any other debts you might have – a bank overdraft, an outstanding accumulated credit card bill, a personal loan taken out for any other purpose with a bank or credit union. On each of these, you will be paying far more interest than on your mortgage. Pay them off first.
Now we are moving into the interesting territory. Let’s say you started saving through the famous SSIA scheme introduced by Charlie McCreevy. You continued to save to this day and now you have a nice lump sum.
Do you keep it going for a rainy day, do you use it to reduce, or even clear you mortgage?
The bottom line is this: If you pay off your mortgage before you retire – you will be living in ‘free accommodation’ for years ahead.
Things in perspective
Let’s put that into perspective. Recent figures suggest that the average rent for a 2 bedroom apartment in Ireland is running at €1,347 per month.
Now, let’s assume you have a good 25-year post-retirement life and you live in that average apartment – you would have to pay €404,100 over the course of your life.
So, clear your mortgage and work out a figure to put away for rainy days.
