How Will You Pay Off Your Biggest Debt? Your Home Mortgage

If you are a homeowner, you probably know the feeling that you are under a tremendous weight and that you will probably be in debt for the next 20-30 years, or possibly even the rest of your life! It can be hugely depressing when you look at that and the likelihood that a mortgage will become a very close “friend” of yours—forever. It’s a huge decision to buy a home and more likely than not, it will be the biggest financial decision that you will ever make. Scary?

Most homeowners have a mortgage, but don't think about how to pay off the mortgage. Here's how to pay it off in your high-earning years before retirement.

In 2015, about 62% of all Americans owned their own homes, a number that’s been pretty consistent over the past 20 years (although there has been a decline since 2000). Here’s the scary part. Less than one third of all those homeowners actually own their homes free and clear, and that means that the majority of them have, wait for it…a mortgage!

When you think about owing money, it is uncomfortable. I have been living with a mortgage payment for most of my adult life, with my first experience way back in 1976 when I bought my first home. I was 27, that was 40 years ago and I am still living with my “friend” even in retirement. He just won’t go away. And that brings me to my point here: having a mortgage in your retirement years is not what you want to do! Trust me on this one, it’s a cloud that hangs heavy over one’s head. If you can, you need to think about that looong before you retire.  Of all people, I let this one slip and I have to blame myself for it. Even if you have the best intentions and the smarts, it still may be something you will have to deal with, so pay attention and let me try to help.

How the Cycle Begins

One thing that happens when you buy a home, or at least as far back as I can remember, is that when you are young you tend to buy a home that you will grow into. That means it may be the place where a growing family wants and needs a little extra space for their kids and a backyard. All of that extra space brings a heftier price tag and bigger taxes and monthly bills for the upkeep. When you are working and upwardly mobile as I like to say, as your family grows, your income usually does along with it. Today, that includes a two wage earning family. So when house hunting and committing today, the dual wage earning family has an even wider-eyed look at home prospects and overextends themselves because of it. Just sayin’!

So how do you get ahead of this potential mess that will be a part of your life for most of your future, if not all of it? Did you think about it before you were all grown up and in the middle of such life encounters?

Paying Off the Mortgage Then and Now

Paying off the mortgage is a goal for most of us. You might have lived through that experience vicariously at least as I did. I can remember when my parents finally did it after 30 years and they had a little celebration way back in 1984 when they paid off that little row house with 3 bedrooms and 1 bath. I spent the first 18 years of my life living there. That was way back when their monthly mortgage payment and taxes were under a hundred dollars a month.

Let’s fast forward to 2017. It’s a very different world today when it comes to housing, mortgages, and financing it all.  The transient nature of the average American and their family make buying and selling properties more frequent that ever before. With each move or relocation, a homeowner almost all of the time obtains a new mortgage and a lot of those are 30-year mortgages that restart the payoff clock once again.

Ways to Avoid the Lifelong Mortgage

One piece of advice I can give in hindsight is to avoid that 30-year “do over” if you can. There are many more options today, such as 15 or 20-year rates designed for the more mobile family who may be moving again in a shorter number of years. Shortening the term of the mortgage and using the equity in the old home to reduce the mortgage is a guaranteed way to stop the potential pain of having a mortgage into your retirement years.

If you’re staying put in your location for the foreseeable future as you approach retirement, you do have several options to choose from. First, there’s the popular “downsizing” approach which literally means moving to a smaller place and reducing the cost of living dramatically. If you are not giving up homeownership and renting, and you have enough equity, you can buy a new home outright, no mortgage at all.

Unfortunately, the trend these days seems to be almost the reverse. It’s becoming more common than ever for retirees to buy properties in new “retirement communities” that offer every type of creature comfort and luxury for the “active” retiree and thus make the downsized property into an upsized expense. Here in NJ you can buy a retirement home for upwards of $600,000 dollars and most are not owned outright.  Even if I could afford to do that, I wouldn’t.

How to Pay Off the Mortgage

I’m not writing this article just for those of you out there who are approaching retirement. There are several things that those of you who are currently homeowners and still have many years ahead of you to work and earn can do to deal with your friend, Mr. Mortgage.

Consider these options:

Refinance your existing mortgage to a shorter term

If you are in the first 15 years or less of your mortgage, for example, it may be better for you to consider a 10 or 15 or 20-year refinance which will shorten the term and save you thousands in interest payments over the life of the loan.  There is a cost to refinancing but it can be rolled into the mortgage if you like and therefore may not require any out of pocket expense when you do it. It may be worth it in the long run; check a refinance calculator to be sure.

There are dozens of mortgage calculators online that can show you the specifics and savings, but the real benefit is to shorten the number of years you will be paying the loan. If you started your current 30-year mortgage after age 45, then you are looking at a mortgage payment until you are age 75, probably fully retired and still having a big unnecessary expense on your plate.

Increase your payments to the mortgage principal every month

If you add even $25, $50 or $100 dollars a month to your mortgage payments every month you can knock “years” off the 30-year term.  Additionally, you can make bi-weekly half payments on your mortgage thus making 26 half payments for a total of 13 months’ payments per year. That will also pad your principal payments and save you time and money. There isn’t any cost to doing this (assuming your mortgage has no prepayment penalty) and if you can afford it, it’s the cheapest way to avoid paying off your mortgage in your retirement without selling and renting. Just make sure that your principal payments are credited properly by checking your mortgage statement.

Considering investing your money instead of paying your mortgage more quickly for a better return

Think about this for a minute, paying extra principal off your mortgage (which let’s say is at a great 4% rate) is a guaranteed way to save money on your interest payments for the loan. The more you pay now, the more money you will save in the end because your payoff is reached sooner. While it is true that there is potential for better returns investing in the market, it isn’t guaranteed and has risk. So bottom line, using the money for investments rather than reducing the cost of your mortgage can actually make your financial situation more tenuous and risky. Besides, many people say they’re not paying off their mortgage so they can invest more, but don’t actually do the investing!

Why Avoiding a Mortgage in Retirement is Important

In my case, I bought my condo after I remarried in 2007 when I was age 56. I took a 30-year mortgage out because it was the most affordable for the monthly payments. I was not in a great place financially after my 1998 divorce and I never fully recovered from it.  My health, which began to decline shortly after purchasing my condo, didn’t help and I was forced to retire from working full time in 2012.  That was about 5 years earlier than I had been planning.

The result of all of these events means that the cost of my mortgage, condo fees, and real estate taxes are a huge chunk of our joint income, rivaled only by our health expenses. Each year since 2007, those two categories represent over 50% of our budget. If I didn’t have the mortgage payment alone staring at me for another 23 years, I would have about 15% more disposable income to spend. Of course if wishes were horses, beggars would ride!

Having said all of the above I worry about this stuff all the time, particularly because my wife is 21 years younger than I am, she will ultimately have to deal with the mortgage when I am no longer around. And that really worries me. That’s why we are paying extra principal each month to shrink our mortgage.

Final Thoughts

There are numerous reasons to own a home and have a mortgage payment to do it. If you need the living space and/or the investment that a home affords you to grow equity and net worth, those are good reasons. It also provides a tax write-off as an additional benefit. Real estate ownership is part of the American Dream and that doesn’t seem to be disappearing any time soon.

The message here is this one: at some point home ownership can become a burden for you or a loved one. Life circumstances like loss of a job, poor health, and divorce can damage your ability to keep and own a home that has not been paid off.  Decisions you make about relocation or “sizing up/down” your home can affect the amount and years you are on the hook for your financial commitment. You may not be thinking at age 40 of what your life may be like with poor health and 20 years left on your payments at age 67. There are some good options to consider now if you own or plan to own a home. Do not ignore what can go wrong and often does…pay off the mortgage during your prime earning years.

Do you fear your mortgage? Do you have a plan in place that will make your retirement years mortgage free?


  1. Emily @ JohnJaneDoe

    Good point on the retirement communities. They look really attractive, but I’m convinced they are really just a ploy to redistribute wealth from retirees to developers. The idea of “buying” something that expensive that you don’t even own bothers me. (Not that I don’t appreciate the idea of paying for a bit of comfort and security as your ability to take care of your home diminishes. I just am not sure that many of the current arrangements are as beneficial as people who sign up for them might think.)

    I really think the key to paying off the mortgage is always buy LESS house than you can “afford.” If you have to stretch to make payments, you put yourself at greater risk and reduce your ability to make extra payments (or invest more). If you can stick to a more modest house, especially over time, and not succumb to housing lifestyle inflation, you are much better off.

  2. I believe one of the biggest mistakes people make when purchasing a home is the initial purchase price. Like you said they’ll grow into it. Never a good idea, because something else always comes up, like repairs or other life costs.

    Sticking to a low price or rule of thumb of 25% of your take home pay for monthly payment will make things more manageable.

    We didn’t make the mistake on the initial purchase, but added a 2nd mortgage which when combined with our 1st really but a strangle hold on our cash each month.

    1. I remember when I was looking for my first home and I think I got really caught up in the thrill of buying. I didn’t look as closely as I should have at exactly what it was going to cost me long term. That’s a problem that I think happens for a lot of young people. Since that time, my purchases have been more geared toward using that 25% limit that you mentioned. Just another example of learning through experience. Something I think we both have had to deal with. I appreciate your comments, Brian.

  3. I couldn’t agree with you more. We are 5 years from retirement, with 5 years left to pay on our mortgage. In addition, we have a very small car payment, which I will pay off this year.

    After speaking with our accountant she recommended that we pay off the car loan and stop paying additional payments on the mortgage. Mainly, because we needed the write off, and our mortgage interest rate is lower than the car loan.

  4. Great post, Gary!

    We have a mortgage at a low rate, so we’re in the let it ride and invest more camp. But, you’re right, many probably don’t follow through on this.

    We will probably downsize before retirement. We would be able to pay cash for a smaller property in a different area with the equity in our current home, so we could move into retirement debt free.

  5. I’m sorry to hear about the obstacles you’ve been facing, Gary. I hear people say, “I’ll never retire” in justifying their spending habits, but they’re making the assumption that they’ll be in good health. After age 55, there are so many physical illnesses that can hit people. I wish you well in dealing with both your physical and your financial health. Thanks for sharing.

    1. Thanks, Ruth. I appreciate your sentiment. I have always felt that somehow, some way I will make things work out financially. And despite the problems that my wife and I are facing, I still feel that way. It just means tightening the belt a little bit more and looking for new ways to earn a few extra dollars.

  6. Jack @ Enwealthen

    Great tips, Gary. For the longest time I didn’t think I’d ever be able to afford to retire. Then I stopped whining and got proactive – making a schedule and a plan. Granted, having 2 kids has put a big dent in the plan, but we’re still on track for a secure retirement. Part of that is by taming the mortgage with shorter term and extra payments, and the other is by planning to relocate to a more affordable area. The nice thing about saving in a high cost of living area – those dollars saved will go twice as far once we relocate in a few years.

  7. Holly

    Divorce can definitely do a number on people. I had to declare bankruptcy when I was 40 and going thru a separation. But it helped me start over free & clear. I now have an excellent credit rating. I remarried last year. My husband had moved back in with his mom (at 40!) after his divorce and purchased the home from her before my daughter & I moved in with him.
    So here we are in our 50’s, and so far behind. Not sure if we will stay put or downsize, as my daughter moved out about 5 months ago, and his daughter and mom moved out about 3 years ago. Its not a big home, it was cramped with 5 people!

    1. I think that your situation is not uncommon, Holly. Certainly this point is a good time to discuss what your plan will be for your future living arrangements. Give it some thought based on the balance of your mortgage and what other options that might be less expensive are out there. You’ve definitely got enough time to carefully consider it and make a good decision. Good luck with it and thanks for your comments.

  8. Great tips Gary. We have started adding some extra money towards our mortgage payments and have significantly reduced our interest payment. Adding a little extra small however small really makes a big difference in the long run.

  9. We bought our first house at 23 and did well when we sold it. (It was very small!) We are about 5 years in on our mortgage now. We actually need to add on to our home, but part of me really wants to keep our nice, low mortgage. You can bet that once we dig out of consumer debt, we’ll be wanting to tackle that mortgage.

    1. Jamie, I’m glad that your first venture into real estate made you a profit! Using that money to fund your second home is a smart move too. It’s good that you’re starting to think about tackling the mortgage even though you’re still working on eliminating your consumer debt. Planning your strategy now will make it go more smoothly when the time arrives. Thanks for your comments.

  10. I have started thinking about buying a house instead of renting if I get into grad school next year and it’s definitely made me a little wary. I’d like to buy a tiny home or even possibly a mobile home and some land, so $100,000 isn’t nearly as much as most people wind up paying, but it still makes me anxious.

    1. Mel, it is a big step to buy a home, however from my own experience, I can honestly say it can be a good way to increase your net worth and give some stability to your financial future. Despite the housing bubble of 2008, I still believe that owning your own home makes sense for most people. $100,000 goes a lot further in some parts of the country, other than here in NJ. But don’t let any outside pressures make you feel that you’re required to do it, your lifestyle and career choices are factors to be considered.

  11. Jax

    We live in a weird market where a mortgage costs less than rent. We made sure not to buy more house than we could afford, and if we ever decide we want to move we can rent the house out for about double what our mortgage and property taxes are. We also wanted a house that would pay for itself, at least a little bit. We renovated our basement to be a private apartment and now our Airbnb guests pay our mortgage for us. We don’t pay too much extra on our mortgage, though I kind of want to every time I look at the balance. I am young enough that the house should be paid off before traditional retirement age, but it still makes me nervous.

    My father bought a huge house with a large mortgage at age 60. I don’t know why a bank would give someone that large of a mortgage at that age, and I don’t know why he thinks that it’s a good idea. But his wife has a lot of kids and million grandkids and they wanted a place that the whole family could stay at. If they can make it work, great, but the whole financial situation makes me really nervous.

    1. First of all Jax, congratulations on what you’ve done with your home and mortgage. You certainly are an example of someone who has a good handle on how to make their investment in a home work out well. Regarding your dad, he is not alone in his desire to own a property that accommodates lots of visiting family. That would worry me because of my own financial situation, and you may want to find out more from him about what would happen if for some reason he was unable to keep up on his mortgage. If you’re comfortable with discussing it with him, you might be able to make a recommendation that can avoid a problem down the road.

  12. Tyler

    Gary, great article. I’ve never owned a home, I’ve rented my whole life even when I lived with my parents. It is something my wife and I have discussed especially since my business has grown and I take up so much room in our tiny apartment. I think though I would save up either the whole amount for the house or a significant down payment.

    1. Tyler, it’s good to start thinking about owning a home for several reasons. One reason would be if you need the physical space. While renting is the best solution for some, homeownership goes beyond the space issue and gets to the financial/investment purposes as well. Having a large down payment (saving as much as you can now) is definitely going to make buying a home easier and more affordable. Thank you for your comments and good luck with whatever decision you make.

  13. The best financial move my husband and I made was buying a $55,000 house when the bank told us we could afford an $80,000 house. That was back when our subsidized mortgage was over 8%. Funny thing was, our investments were paying more than that for a while. When we needed more space we again bought a much less expensive house than we were told we could afford, and paid 50-100 extra every month. We did get lucky and got an unexpected inheritance that allowed us to pay and extra $20,000 toward the house, and for us things worked out such that the house payments finished about the time the big tuition bills started. It’s been a big help because after Katrina the homeowners and flood insurance premiums have skyrocketed.

  14. We made the decision to sell our house and rent 13 years ago, a decision that I regret ever since. Rents have since rocketed in the UK and so have house prices. Nevertheless, we now have a plan to buy again within 2 to 3 years and have the mortgage paid off by the time we are at state pension age. It’s so easy to look back with hindsight, I can’t change the past but I would urge anyone to do what you can to get on the housing ladder, get your mortgage paid off asap and try to hang on to your property (stay out of debt and have savings in case an unforeseen catastrophe happens so that it’s not repossessed). Renting in retirement age is a miserable prospect.

    1. I’m glad that you’re planning to buy another home and make sure that your mortgage is paid prior to your retirement. Even though you might have had an earlier setback, it’s never too late to correct it and you’re doing just that. Thanks so much for sharing your personal experiences, Jen, and good luck.

  15. We looked with the real estate for a home for quite a while until we bought this home. They wanted to sell us a more expensive one compared to our wages. You know we probably could have gotten in a better neighborhood/nicer house but We said no -we like to eat. They didn’t seem to get that! We finally bought this one on our own 23 years ago and assumed the mortgage. Although we have paid off the mortgage things happen and we need to fix a lot. All worth it for a staple home for us.
    Every once in awhile we think about another home and then get turned off by the prices. We remain happy here that way I guess.
    I know your worry about that mortgage and I admire your persistence on getting it paid off.

  16. Jacq

    My parents divorced,but we’re ok financially. My dad & stepmother live in a 55+ in NJ. They have made friends on their block and the community. For me knowing snow removal is covered is a big relief. When I was a kid my dad would clear our drive way & then help out 3-4 elderly neighbors. I wanted to know who would do that for him someday.
    Mom said adios to the property taxes and moved to Florida and downsized the house. The weirdest part for me is she has the same rooms, (kitchen living room combo, dining room ) but they are just smaller, which is ok.
    I would ideally like a custom tiny house. There is so much inefficient about houses I’ve lived in. Trouble is, I’m in a metro area and land is at a premium. This is part of my desire for FI. Ditch the commute, find affordable land, I know my basic tiny house is 30-50k and go from there. We shall see what the future holds.
    Wishing you all the best.

    1. Thank you, Jacq, for your comments. It sounds like your parents both have settled in to a new part of their lives and you feel that they’re in a good place, and that’s comforting. In your own case, I think that you have a good idea of how and what you want to do for your lifestyle. As I have said in numerous posts, the key to success in anything is to have a plan. I think that you have one, and now it’s a matter of making that plan flexible to any situations that life may throw at you. Wishing you good luck!

  17. Steven Goodwin @ MyFamilyOnABudget

    Great article. We bought almost 7 years ago and bought with the intention of having 2 kids and “growing into our house” like you said. So far, this has worked out well. Although we haven’t been able to make extra payments on the mortgage, we have been able to refinance from a 30 year mortgage (with 26 years left) down to a 20 year mortgage (now having 17 years left) and dropped our interest while only upping our payment a little bit. So far this has been great, although our mortgage (escrowed) and association dues account for about 34% of our take home pay at this point.
    Our goal is to get our mortgage done by the time the girls (now 4 and 2) get into college. This will hopefully free up cash flow to finish up college debt free and continue stockpiling money into our retirement accounts.

    As far as investing, we are working to get to 15% of gross income into retirement before starting to work on college funding and extra principal on our home.

    1. Congratulations, Steve, on the refinancing and knocking off years from your mortgage commitment. That is something that really should be a priority for people and you’ve done it. You have a plan in place now and I think it makes a lot of sense even though it might be a little stressful for your finances currently. Time will be on your side because you’re starting early to plan for those big events down the road, like college and retirement. Thanks so much for sharing.

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