Believe Me, You Should Never Have a Mortgage When You Retire

You know how I often say you can learn from life and sometimes you learn from the mistakes you make? Guilty here! One of my biggest bungles was and is the fact that in my 70s, I still have a mortgage on my home. Now in my defense (and of course I will defend myself), there are a few good reasons why this has happened. But my advice is to try as damned hard as you can to never let it happen to you the way it happened to me. No mortgage when you retire!

Condos representing not having a mortgage when you retire

Let’s Start at the End First?

I am going to assume you grew up and lived either in a house that your parents owned or wishing and hoping you had one. After all, it’s the American Dream to be a homeowner and has been since the days of the covered wagon and the westward expansion. In other words, people wanted to own something, a little piece of land that was all theirs. That tradition became the American Dream and despite all of the complications and costly price tags it still does exist today.

So assuming I haven’t lost you here because you prefer to rent, travel, live in various places throughout the world, have no family ties and are just a plain bon vivant and not at all like me, I will move on to my story next, which is…

In the Beginning

Growing up in the lower middle class as I did, it was quite an accomplishment that my mom and dad were able to buy a home and own it outright before they passed away in their 80s. It wasn’t the Ponderosa mind you, just a small rowhome in Philadelphia. But it had everything you’d want including a little lawn in front with a patio and a driveway that became my basketball court as a kid and a great place to put up the 5×4 swimming pool each summer, too. Oh and yeah, Mom hung out the clothes there on a sunny summer day, an art lost in the 21st century cities these days.

As simple as it all was back then (the 1950s and 60s), it was all ours and we loved it.

Money in the 1980s

If I remember correctly, my parents paid about 50 bucks a month for 30 years to pay off their mortgage. I remember the mortgage burning ceremony (not actually burning it, but mentally you understand) and the fuss we all made in 1983 when they did. Mom was age 66 and Dad was age 67, almost right on the money when it came to the plan.

They got it right when they finally entered those golden years with no mortgage. That was certainly a weight lifted. Even if 50 dollars a month wasn’t life changing back in 1983, it was certainly a burden.

In 1983, the average median income was $11,250.00 (adjusted for inflation today that would be $30,174.87) and the minimum wage was $3.35 an hour (equivalent to $9.57 in 2022 dollars). You can sort of imagine how money was back then even if you didn’t live through it yourself.

The Dream Lived on in Me!

Maybe I learned it from my mom and dad or maybe I learned it from watching “Bonanza” as a kid, but owning my very own piece of land (the Ponderosa as the Cartwrights called theirs!) was my early goal in life. Once I was married (1973), my wife and I set that as our goal.

By 1976, we had done it! Our first beautiful home in suburbia, at the cost of over $50,000 and a 30-year mortgage wrapped around our necks at age 27. Remarkably, it was ahead of the goal to retire at 65 and not have a mortgage. But who can actually predict the future? Not me, that is for sure.

The Small Details

I won’t rehash all of the small details here again, but there were children, and moving to a new larger home, and job changes, and yes, financially crushing divorce, and all of the other dents in the plan to finally make it to retirement with no mortgage that made it impossible for me to achieve.

At this point in life, as you approach your mid 50s like I was, your best hope is that you can afford to live at all. If you’re a bit lucky though, the markets smile on you and the housing market actually did that for me back in 2000. I purchased a small condo for myself at $84,000 and only 6 years later sold it for over $200,000!

That’s one of those little asterisks that comes with home ownership as “inflation” can pump up your net worth like a magician can deceive you with a deck of cards, one minute you see nothing, then all of sudden your see a much bigger something. Real estate is funny like that.

Getting Remarried and Starting the Quest Once Again

In 2005, I feel in love with Suzanne. She was a renter and I was a condo owner and neither of us lived near where she was working. And well, you can see where this is going… We needed to relocate and I figured we’d move closer to her job and both have a smaller commute so I sold and we both became homeowners (condo owners more accurately). Her first home and a goal she had, and for me, a new 30-year mortgage at 2007 prices and rates and all coming at age 57!

You can do the math here for yourself: I was facing age 87 when it would all be mine (and hers too, except she’d be age 66). The plan once again has shown its face.

Why You Don’t Want to Do What I Have Done and Have a Mortgage When You Retire

The math for me just doesn’t work here. 87 and still making mortgage payments? I just had to do something about that.

When refinancing became so tempting, I bit the bullet and refinanced at a great rate and did it with a 15-year loan, cutting 15 years of payments off and making homeownership something that might actually happen before I go. I wish I could have done it sooner, but better now than never. And even though I am still fighting those odds, for my wife the light is nearer and brighter and that makes me feel good.

So Why Is Having a Mortgage in Your Golden Years So Wrong?

When you are retired, you haven’t got the endless enthusiasm that decades in front of you brings to the plan. You should enjoy the challenges of homeownership in your golden years without the burden of debt. But then there is this.

You have other debts to pay off. Retiring without a mortgage could make your senior years a lot less stressful. Once you retire, you most likely will have a lower income than what you earned during your working years. So not having another sizeable debt payment to make will buy you more flexibility and more peace of mind. That is a certainty. And that is the point here.

In my defense (see I told you I would), no one plans for divorce in the beginning. Despite the fact that it’s now very common, the financial impact it has on families is brutal and if you don’t have good luck, it can follow you around for decades or even forever. I may have just struck on that owning a home and then losing it when divorcing is a good reason for not owning one in the first place. But no…I don’t actually believe that.

Part of the rosy picture associated with retirement is the thrill of kissing that monthly mortgage payment good-bye. Mom and Dad did it and that’s what I wanted to do.

Final Thoughts

It’s never a good idea to blindly accept a piece of advice, even if it comes from the mouth of one who experienced it himself, but this one is my mantra. Don’t carry a mortgage into retirement.

It is true that the idea of carrying a mortgage when you retire can depend on a variety of factors. But doing so is not any guarantee you will be able to succeed with one and it can substantially complicate your financial life. It’s a much easier, burdenless financial way to live in retirement.

A great safety net is the home equity you have which can be a huge positive factor in uncertain times. Homeownership gives that to you and complete homeownership, absent a mortgage, is even better! That’s the word from one who has been there.

How do you feel about mortgages in your retirement years? Use that unpaid stash you have socked away to invest? Some say you can’t eat your home (gingerbread houses excluded here) so does that mean you use your cash for other necessities besides the security of homeownership? What is your opinion?

6 Comments

  1. My parents are in there 60s and I don’t think they will ever own a home through a series of unfortunate mistakes. At this point, if they can retire on with their own finances, I’ll be grateful.

    I’m trying to make good choices and learn from their mistakes. My hubby and I are working towards the house being paid off in 15 years. I hope to early retire by then and being mortage-free is a big part of that goal!

    Good luck, Gary!

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