If you're anything like the majority of people, paying off your mortgage and retiring debt-free sounds very alluring. The majority of people will go to great lengths, regardless of whether it is financially wise to live without a mortgage.

It's an important victory and the end of a large monthly expense. However, for some homeowners, their financial circumstances and ambitions may require juggling other obligations while making good progress on their mortgage.

You Might Wish to Pay Off Your Mortgage Before Retirement If,

●      You want to save money on interest payments - The interest on a mortgage can add up to tens of thousands of dollars over the course of the loan, depending on its size and tenure. By paying off your mortgage early, you can use that money in the future for other goals.

●      You're aiming to lower your base costs - You'll be able to live much more reasonably after the mortgage payment is no longer a necessary part of your monthly spending. This is especially beneficial if you have a limited income.

●      Your mortgage has a higher interest rate than the rate on an investment asset - Consider comparing the after-tax rate of return on a low-risk investment to your mortgage rate with a comparable duration. You would be better off paying down your mortgage if it has a higher interest rate than the rate on an investment asset.

●      You value your mental health - A mortgage that has been paid off might reduce stress and give retirees more retirement flexibility.

You Might Not Wish to Pay Off Your Mortgage Before Retirement Since,

●      You might have low cash reserves - You don't want to pay off your mortgage at the expense of your reserves if you don't want to wind up with a house but poor cash. Hence, a cash reserve equivalent to three to six months' worth of living expenditures could be built in order to prevent such circumstances.

●      Retirement savings must be caught up - Increasing those contributions should definitely be your primary priority if you finalise a retirement plan and discover that you aren't making enough contributions to your super. Until you withdraw them, savings in these accounts grow tax-deferred.

●      You might have debt with a higher APR - Close out any higher-interest loans before paying off your mortgage, especially non-deductible debt like credit card debt. To have lower expenses once you retire, make it a routine to pay down nondeductible debt each month rather than letting the sum accumulate.

●      You might miss out on investment returns - You might think about maintaining the mortgage and investing the extra money you have available if your mortgage rate is lower than what you would make on a low-risk investment with a similar duration.

Remember that accumulating money is the key to a successful retirement and not just paying off debt. Therefore, even if paying off your mortgage early may seem enticing, building wealth can afford the costs of owning and living in a home.

However, an informed decision depends on your future goals and what you expect during your retirement.

And while you might be tempted to decide to pay off your mortgage ahead of schedule without analysing the unforeseen future, our financial advisor in Sutherland Shire can help you consider the importance of future mobility to reach an informed decision.

Contact us today for more information.