Re: “Equity in your primary residence isn’t all that helpful if you intend to remain there or somewhere similarly priced.”. Agreed. My thought is to be mortgage-free on two properties, the larger one to rent, the other to live in during the warmer NE months. The only way that will work is if we are very frugal in the rental or purchase of the “winter” home. For me, its all about downsizing to keep expenses at a minimum while keeping income as high as possible for another 10 years. The rental income should be enough to pay for frugal winter housing as well as the taxes, insurance and maintenance on the properties. I hope we then can invest a higher percentage of our incoming wages to retirement investments. In the end, we’ll sell everything to supplement our social security and downsize to a small condo in late retirement. Either way, there isn’t going to be a lot. Not sure if my plan will work, but its the best plan we have right now.
Primary home equity when mortgage is paid 2020: $400K (today’s value)
Equity in garage/apartment 2020: $120K (today’s value)
Rental income: $15K/year vs. expenses $5-6K, leaving $10K for 6 month condo rental plus year round utilities ($1700/mo)
@mycupoftea…everytime we refinanced, we got a lower interest rate, a lower payment, and a shorter remaining time to pay. We went from a 30 year fixed rate at 11% to a 15 year fixed rate at 7%. We then went from the 15 year fixed rate to a 10 year fixed rate at 4%. Then we went to a 5 year home equity loan to pay the remaining amount…at 2.9%.
And because we didn’t switch banks, most of these had no or very minimal closing costs.
We have a home equity loan, but it’s being used to fund an investment that is paying a far higher dividend than what we are paying in loan repayments, so while we would be included in the camp of those with mortgage debt we could pay it off at any time if we chose to.
And regarding moving near the kids…mine are like gnats. I will make a choice where to live based on where I want to live. The realit is, you could move to be near your kiddo, but then he could take a job elsewhere and move.
I’ve watched my inlaws move seven times since they hit age 70, and each move has been more difficult, challenging, and a bigger headache for everyone.
I won’t do that. I already told my husband…we will move one time after age seventy…And that is it…and it will be to downsize from our too big house.
We have a mortgage but only because the rate is so low. We could pay it off but instead have invested the money and are getting a return that is higher than 3.25 percent (our mortgage rate). My dad took out a mortgage at the age of 70. Oh, and my dh is retired.
@ BunsenBurner I am sure you are right, and in your kids example it obviously makes sense even without the calculation. Everyone should consider this math before refinancing, but I am afraid that unfortunately many people only consider their new monthly balance (though the posters on the thread are clearly well-informed to avoid his mistake)
We currently have a mortgage with a low rate. The mortgage is about 50% of our home’s value. We will most likely sell in about 5 years and move to a community where a similar home would cost about $100,000 less than the value of our current home. We may or may not have a mortgage on that home depending on the rates at the time. I also expect my home and the community we plan to move to will appreciate or depreciate at a similar rate over the next 5 years.
Moving and downsizing is probably one the most difficult decision for me to make. Makes a perfect sense financially, but I prefer to stay in denial. I’ve read somewhere that moving is the 3rd most stressful life event following death and divorce. Certainly true for me, and I just don’t have the energy to deal with it. Maybe some day when I retire, but not today.
I do taxes for a living so I see how others handle their finances. I’d say yes, most people of that age group still have a mortgage. I am constantly astounded when I see people in their 40’s, 50’s and 60’s refinance with a new 30 year mortgage. Some even take more money out. If they can’t live within their means while earning a good wage what makes them think they are going to be able to make those payments when they retire?
I am 59. Paid off our mortgage 10 years ago. This is our second house. First one was a 15 yr mortgage but we had to relocate. Second started again but we paid it off in 12 years. My son and his wife bought a house before they were married. Well, he did and then they got married. Were barely making any money then. When both started working, instead of buying a new house, they accelerated the payments and will have this one paid off six months from now. After 8 years of owning it. They now have the equity in this one to move into something that will accommodate their growing family. They will be putting 50% down so it will be a 15 year mortgage that they hope to pay off sooner. They are 30.
The highest % down payment we ever paid was 40%, and it was our N-th house mortgage and/or refinance. But the house we bought in later years was more expensive (in OUR standard only) so we felt we always owed a lot.
We got a 30 year at age 37 (first/current house). Refinanced five years in to a 15 year so we’d have equity to taqp for college expenses. Refinanced last year to another 15 at 2.6% to pay off the HELOC (less than one year of college expenses). The shortest term we could get on this refi was 15. We have about 75% equity and plan to pay off within 6-7 years – the hope is to be done with the mortgage by age 60. Our mortgage is a couple hundred less than we were paying for a townhouse rental in 1998. Buying something smaller is going to cost significantly more that what we’ll get for our current house.
We’ve bought 5 different homes since we were married (and also had 5 different rentals. . .) Unfortunately our last move was during the crash–we lost almost all our equity on our last house. So, yes, we still have a mortgage and only about 1/3 of it paid off. Low rate, though. Should have it done by the time H is 65. All of my siblings (who didn’t move so many times) have their houses paid off already-- I’m envious.
Considering that most professionals reach the peak of their earning power in their 50s, I’m a bit confused by the question. Most people 55-65 are working, earning money, and so can afford to have a mortgage. Most of my friends in their 50s have a mortgage.
Now, if the question were about people aged 70-80, I’d understand.
But based on the answers here, I’d say my family is an outlier. Yes, we have a mortgage. We moved and bought a new house 2 years ago, and took out a 10-year loan. No way we could have paid cash. Since my husband doesn’t plan on retiring for another 8 years at least, this is not a problem for us.
Now, the problem may be that when he retires, I’m pretty sure I don’t want to live here anymore, and whether we can afford to pay cash for our next premises is an unknown. That will entirely depend on how much this house sells for. But I’m not going to worry about that for another 5-10 years, since I don’t know where I want to move, what type of house/condo/apartment I want, etc.
We are LBYM (Live Below Your Means) types. We paid our mortgage off early, and I expect that when we (finally) move to our retirement home(s), we will spend less than we sell this house for. We are in a HCOL area, and can reasonably expect housing/taxes to cost half of what they do here in Northern NJ. Property taxes are over the top insane!
We had a 60% down payment and our monthly mortgage payment (which included escrow, property taxes, insurance) was less than any decent rental in our HCOL area.
We purchased about 1989 and finished paying mortgage in 2012. Not as fast as some, but as planned, before H retired. We did refinance a few times along the way for falling interest rates. It all worked out. Paying the college tuitions slowed mortgage prepayments a bit.
