• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

Should retirees pay off their mortgage?

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

Status
Not open for further replies.

shobuddy

Junior Member
My retired parents live in Maryland and are 72 and 67 years old. Father is disabled. They live in a single family home with 22 years remaining on their mortage. They also have a second home that they rent out. They are in a position where they can pay off their mortage with enough of a cushion for emergency funds. At this point they are not sure how long they will stay in the home as it is rather large for just the two of them. All that said, I'm wondering what some of the pros and cons are for them paying off the mortgage. The obvious pro is avoiding future interest which is in the six figures. What are some of the cons as far as equity taxes (if they sell and move), etc.? TIA!
 


Just Blue

Senior Member
My retired parents live in Maryland and are 72 and 67 years old. Father is disabled. They live in a single family home with 22 years remaining on their mortage. They also have a second home that they rent out. They are in a position where they can pay off their mortage with enough of a cushion for emergency funds. At this point they are not sure how long they will stay in the home as it is rather large for just the two of them. All that said, I'm wondering what some of the pros and cons are for them paying off the mortgage. The obvious pro is avoiding future interest which is in the six figures. What are some of the cons as far as equity taxes (if they sell and move), etc.? TIA!
This is not a legal question. Tell your parents to speak with a financial consultant.
 

Zigner

Senior Member, Non-Attorney
My retired parents live in Maryland and are 72 and 67 years old. Father is disabled. They live in a single family home with 22 years remaining on their mortage. They also have a second home that they rent out. They are in a position where they can pay off their mortage with enough of a cushion for emergency funds. At this point they are not sure how long they will stay in the home as it is rather large for just the two of them. All that said, I'm wondering what some of the pros and cons are for them paying off the mortgage. The obvious pro is avoiding future interest which is in the six figures. What are some of the cons as far as equity taxes (if they sell and move), etc.? TIA!
You need to have them speak with a local financial advisor who can examine all of the details relevant to their situation and advise them accordingly.
 

FlyingRon

Senior Member
As pointed out, this isn't a legal question and the financial advice depends a lot on situations that you've not imparted to us (and probably should not anyhow).

They should however get sound advice not only on the mortgage but also some legal issues about estate planning, advance medical directives, and possible medical and general powers of attorney.
 

adjusterjack

Senior Member
I'm wondering what some of the pros and cons are for them paying off the mortgage.
As far as I'm concerned there aren't any cons. I am a big fan of owning a home free and clear after my working years are over. The title of this forum is Mortgages, Refinancing, and Foreclosure so I'll be happy to give you my opinion, which is: Sell the rental, pay off the home, avoid tenant hassles, mortgage company vultures, and 22 years worth of interest that sucks you dry and is probably no longer tax deductible.

Watch your bank accounts grown each month that you get to keep your retirement income instead of handing it over to the mortgage company.

You'll pay some capital gains tax on the rental. Big deal. It's a fact of life. There really isn't a tax issue on your main home unless you sell it for more than a $500,000 gain over your purchase price.

Then there is the psychological factor. After 20 years of hassling with mortgage companies (constant mistakes month after month) and hassling with tenants, I sold my rentals in 1998 and bought a house for cash. A month later euphoria set in when I opened my check book, saw that the last two paychecks were still there and I never had to make a mortgage payment again. My savings grew month after month. I paid off a new car loan in two years. Two years after that I bought my next new vehicle for cash. I retired at the age of 60 with a lot of money in the bank. I took Social Security retirement at 62 and it pays all my bills.

When I decided to downsize this year I bought a second house for cash without having to be under the gun to sell my other house.

So, yeah, if you can pay off your mortgage and still have a comfortable cushion of savings whether you sell the rental or not, I'm all for it. I would sell the rental, though, and take the equity. Don't fear the tax man. Think of it this way. If your gain is $100,000 and you have to give the government $20,000, you're keeping $80,000.

Who knows, when you decide to downsize you may also be able to buy your next house for cash and take your time moving.

:giggle:
 
Status
Not open for further replies.

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential
data-ad-format="auto">
Top