Talked to 2 Retired Neighbors .. They didn't pay off mortgage, but both have pensions

[bada bing]

I retired last year with 20 years remaining on a 30 year fixed 2.625%. I'm not drawing SS or pension yet, maybe in another 8 years. I'm living off of savings and hobby job in the interim. I'm not about to pay $1 early on the mortgage. I shoulda done a cash-out refi at similar rates prior to retiring. The house equity has grown in the last 10 years and it would have been nice to to put it to work. I don't think I could get the same rates or nearly as easily since retiring.

[street]

Quote:

Originally Posted by ProGolferWannabe We recently purchased a new house and took on a mortgage after being mortgage free for a number of years. We are both retired now. I had considered paying off the note ($260,000 at 3.00% for 30 years) as we have the resources and I am generally more comfortable not carrying any debt. But with inflation ticking up a it recently, I have wondered if it would make more sense to keep the mortgage...my payments would be constant (in nominal dollars), but potentially less (maybe significantly so) in real dollars as time marches on. Seems like a pretty decent inflation hedge.

That makes perfect sense. It isn't always best to pay off a debt and are benefits to having debt.

[Koolau]

Since money is fungible, it really comes down to the details and has little to do with whether you have a pension or not. If you pay off the mortgage, you have less "other" assets. So it's what you are comfortable with AND the little things like mentioned above: (Repaying debt with inflated dollars is one potential reason to keep the mortgage and your growing non real estate assets.)

Always remember, YMMV.

[Romer]

It is a personal thing. I did the math and I would come out ahead if I hadn't paid off the house, but for me it was an accomplishment and one of 3 pillars I needed to achieve to build a successful retirement

Pillar 1 - Pay off House Dec 2020
Pillar 2- Start receiving Pension - July 2021
Pillar 3- Achieve investment balance to retire- I actually achieved this last year and dint realize it Now I am just working a good transition for me and my co-workers

When I paid off my house I felt a HUGE sense of accomplishment. This is my dream house and I plan to die here, well maybe not in the house but I dont plan on moving again.

We have zero debt. It may or may not be the best financial move, but for me its a big part of financial independence. I don't owe anything to anybody except for taxes

[ERD50]

Quote:

Originally Posted by ivinsfan Why does it matter what your neighbors do, you aren't them and no two people have the same sets of numbers. ...

Right. Plus, what does having a pension have to do with it? Different people will have different amounts from different sources.

I wasn't taking my pension, and I kept my mortgage (until I sold the house this year). I'm planning on getting a mortgage again at these low rates.

-ERD50

[Rambler]

It all comes down to personal comfort with risk. If you are comfortable that the money you owe makes more than it costs you, then it makes financial sense to keep the mortgage. Comfortable is the key word.

As for me, I have no pension, mainly after tax investments. They do “currently” make more than a house payment would cost me. But there have been times otherwise as well. I paid off my house in my mid 30s and the DW and I decided to never have a mortgage again on our main home. If we were to ever consider a vacation home, we might consider a mortgage, but not the main home. For us, its just a “comfort” thing.

[Koolau]

Quote:

Originally Posted by ERD50 Right. Plus, what does having a pension have to do with it? Different people will have different amounts from different sources. I wasn't taking my pension, and I kept my mortgage (until I sold the house this year). I'm planning on getting a mortgage again at these low rates. -ERD50

Probably right about the wisdom of taking out a mortgage at this time (low rates - impending inflation) but I just don't want to go through that process again. I've made a lot of decisions (for instance NOT over-weighting equities) which have demonstrably cost me money. Having said that, I have "enough" and I am very comfortable with my decisions and prefer my situation as is. I envy folks who can ignore the "stress" of financial moves and just go for it. I'm not that person (usually). I'm sure it will work out for you.

[Teacher Terry]

When we retired 9 years ago we bought a house for cash. Fast forward to last winter we divorced and sold the house. I bought a condo and took out a 85k 30 year mortgage because the rate was 2.75%. Financially it made the most sense for me.

[Markola]

Every scenario I run shows I’d be worse off if I took a chunk of money earning 7% to pay off a mortgage costing 3.68%.

[Montecfo]

I could have paid off the mortgage decades ago. But I keep it because it is at 2.49 pct, and I expect my investments to make more over my time horizon. That and it's an inflation hedge.

And no pension here, retired with investments.

Now, in the old days it was different. I think my first mortgage was at 12 pct, second at 8 pct and there were some 7s and 6s as rates declined in the bond bull market. I made extra payments then, but not this century I don't think.

I know, burning the mortgage can be an important emotional milestone. But I burned the mortgage mentally decades ago, when I had enough in the bank to pay it off.

[ivinsfan]

Quote:

Originally Posted by Teacher Terry When we retired 9 years ago we bought a house for cash. Fast forward to last winter we divorced and sold the house. I bought a condo and took out a 85k 30 year mortgage because the rate was 2.75%. Financially it made the most sense for me.

Your payment must be pretty tiny with those numbers, nothing to lose sleep over that's for sure...

[Koolau]

Quote:

Originally Posted by ivinsfan Your payment must be pretty tiny with those numbers, nothing to lose sleep over that's for sure...

Yes and Teacher Terry gets to pay back her mortgage in less valuable (inflated) dollars. What a great deal!

[Scuba]

Quote:

Originally Posted by Montecfo I could have paid off the mortgage decades ago. But I keep it because it is at 2.49 pct, and I expect my investments to make more over my time horizon. That and it's an inflation hedge. And no pension here, retired with investments. Now, in the old days it was different. I think my first mortgage was at 12 pct, second at 8 pct and there were some 7s and 6s as rates declined in the bond bull market. I made extra payments then, but not this century I don't think. I know, burning the mortgage can be an important emotional milestone. But I burned the mortgage mentally decades ago, when I had enough in the bank to pay it off.

Ditto. We have low rate mortgages on both of our properties and have no intention of ever paying them off early, if at all. We have no kids so if a mortgage is owed when we die, that’s fine with us. We could easily pay off both mortgages but I sleep better at night with maximum liquidity.

[street]

Quote:

Originally Posted by Markola Every scenario I run shows I’d be worse off if I took a chunk of money earning 7% to pay off a mortgage costing 3.68%.

Yes, it isn't always a good thing to pay off debt. It the late 80's early 90's interest rates were high. I can't remember what mine was but I paid if off as soon as I could. I really dislike debt but not always a bad thing.

[Aerides]

OP you've been around here long enough to know that paying off a mortgage is one topic on which no one agrees.

I'm just amazed that two different neighbors divulged such personal financial details!

[pb4uski]

Quote:

Originally Posted by Koolau Since money is fungible, it really comes down to the details and has little to do with whether you have a pension or not. If you pay off the mortgage, you have less "other" assets. So it's what you are comfortable with AND the little things like mentioned above: (Repaying debt with inflated dollars is one potential reason to keep the mortgage and your growing non real estate assets.) Always remember, YMMV.

+1 I had a 3.375% 15-year mortgage when I retired 10 years ago and it didn't bother me a bit. I had it on autopay and it was ~18% of our spend at the time, but since the 18% was budgeted, I hardly knew it was there.

I started my pension a few years later and even though my pension was about the same as our mortgage payments the notion of "Whew, it's nice that the mortgage payments are now covered" never dawned on me.

At the end of 2019 I decided to payoff the mortgage while simultaneously changing my target AA for cash from 5% to 0%... trading off some cash that at the time was yielding 1.7% in an online savings account (0.4% today) for the 3.375% mortgage and accepting less liquidity.

While it is "nice" to not have a mortgage or mortgage payment, I don't at all get the euphoria that some get by being "debt-free". I guess that when we had a mortgage knowing that I could pay it off at any time I wished with a few taps on a touchscreen was good enough for me.

I guess a lot of the decision comes down to how much one is bothered by having "debt".

[pb4uski]

Quote:

Originally Posted by Markola Every scenario I run shows I’d be worse off if I took a chunk of money earning 7% to pay off a mortgage costing 3.68%.

I think this is common unless you simultaneously change your AA so the mortgage is effectively paid from your cash or fixed income components. I recall reading somewhere that the yield on the 10-year Treasury is a good estimate of bond returns. So let's say that the 10-year Treasury is 1.5% and you have a mortgage with a 3% interest rate and your AA is 60/40 and your mortgage is 10% of your nestegg.

If you pay off your mortgage and simultaneously change your AA to 67/33 then you would likely come out ahead. Of course, YMMV.

[Time2]

I tell people if your mortgage rate is low don't pay off your mortgage, I consider anything below 4% low. If you lose your job, you will be glad you have that money in an investment and not in your house. If you lose your job, the bank won't have much interest in loaning you money.
If retired, I still think you are better off financially with a low interest mortgage and investments that are growing more than you mortgage rate.
All that said, we bought our home 27 years ago and paid cash. We fully retired in 2018. Just recently I opened a margin account and borrowed against some mutual funds at 1.99%, then opened a heloc at 0.99% (for 6 months), using that to pay down my margin account. I used the proceeds to mortgage a house for my daughter and son in law at 4%. The house is a fixer upper and the mortgage is 4% 1st year and 6% the 2nd year. I hope they complete the remodeled and get a new mortgage within a year. If it goes 2 years, I would write a new mortgage. Not my plan though

[misanman]

Haven't had a mortgage in 20 years or so. And at this point I can't imagine getting one. We do have a $250K home equity line of credit. The interest rate isn't too bad now at 3% but it is not fixed so would only consider using it for short term financial flexibility.

[Dash man]

I hate having debt and paid off our mortgage eleven years ago, three years before retirement. I do have a small pension with no COLA, but it barely pays for the property taxes and insurance after income taxes.
My thinking at the time I paid off the mortgage was if the markets took a prolonged dip, a long bear market, I’d be forced to sell my assets at a lower price to pay the mortgage. A huge increase in my SORR. I think a lot of people get complacent with the huge gains we’ve had these past years and take on more risk. I prefer no debt, especially for the roof over my head.