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At age 60, you continue to have hopes and dreams, and though you’ve lived six decades, a part of you still feels like a kid. That’s why it sometimes feels odd to plan for retirement. It’s hard to reconcile how young you feel inside with planning for your golden years. However, planning is essential.

If you’re nervous about carrying a mortgage at 60 and wonder what it means for retirement, you’re in the right place. Here, we’ll discuss your options and help you determine if you’re doing better than you think.

Conventional wisdom vs. reality

At one time, the conventional wisdom was that a person needed to pay off their home loan before they retired — and it made sense. After all, the lower a person’s bills, the further their retirement income could stretch.

While plenty of retirees have paid off their mortgages, many have not been able to do so. According to the Joint Center for Housing Studies at Harvard University, 41% of homeowners over 65 were still paying a mortgage in 2022. What’s more, 31% of homeowners 80 and over continued to carry a mortgage.

For some homeowners, having a mortgage is no big deal and fits neatly into their monthly budget. However, a recent study published by the Michigan Retirement and Disability Research Center at the University of Michigan found that the typical retiree still paying a mortgage is running short of money.

Determining whether paying a mortgage will be “no big deal” when you retire can help you plan your next move.

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Your specific situation

Whether or not you should be worried depends on the specifics of your situation. Asking yourself the following questions can help you sort it all out:

How does my post-retirement budget look?

Now is a good time to create a budget based on your expected sources of income, including Social Security, pensions, annuities, and retirement account withdrawals. Next, add up all your post-retirement expenses, including mortgage, utilities, groceries, transportation, healthcare, and any other bills you pay. Does it seem you’ll have enough to cover your monthly obligations, or is there a fairly wide gap that must be bridged?

How’s my interest rate?

If you’re currently paying a high interest rate, it’s time to decide whether you’ll try to pay off that final $200,000 or refinance the mortgage (more on refinancing in a moment).

Can the remaining balance be paid off?

Imagine that you borrowed $320,000 at 7% interest 15 years ago. You took out a 30-year mortgage, and your monthly principal and interest payment is $2,129. That leaves you with 15 more years of mortgage payments. If you pay an extra $1,000 monthly toward the principal, your mortgage will be paid off in 6.75 years, or shortly before your full retirement age.

Do I even want to pay the balance off?

There are a few circumstances under which you should focus on other financial issues before tackling your mortgage. For example, if you carry high-interest debt (like credit cards), your best move is to pay that off before doing anything else. If your investments regularly earn a higher interest rate than you’re paying on your mortgage, it may make sense to hold onto your mortgage and continue to invest.

If you ask yourself these questions but aren’t happy with the answers, it’s time to pivot to a new plan.

Reimagine your life

If you can already tell that your housing payment will strain your budget, imagine what your life would look like if you sold your current home and purchased something smaller. “Smaller” doesn’t mean less nice. It’s possible that you’d fall in love with a low-maintenance home, cool old loft, or smaller house in the country.

Given how quickly home values have climbed, you’re probably sitting on a nice pile of equity. However, home values have risen pretty much across the board and you might find yourself paying more for a smaller home than you paid for your original home. If that’s the case, you have at least three options:

1. Hope the housing market turns around

Wait for home prices to soften, and you’re in a better position to pay less for a smaller home. The goal is to decrease your monthly budget.

2. Watch mortgage rates

Keep your eye on mortgage rates, and when they drop sufficiently low, refinance your home by taking out another 30-year mortgage. Let’s say your current principal and interest payment is $2,129, and rates fall to 4.5%. Refinancing your loan for another 30 years means your monthly principal and interest payment drops to $1,013, saving you $1,116 monthly.

Refinancing a mortgage may sound intimidating, but it’s pretty straightforward. If you decide to go this route, check out some of our favorite mortgage lenders for refinancing.

3. Look into a reverse mortgage

A reverse mortgage is an agreement in which the lender pays you a specific amount of money each month rather than you paying the lender. You retain ownership of the home, but the money received from the lender must be repaid when you die, sell the house, or move out permanently. If you decide to look into a reverse mortgage, do so carefully. The reverse mortgage industry has mixed reviews due to lenders that charge sky-high fees and otherwise seek to separate homeowners from their equity.

Bottom line: Whether owing money on a mortgage is a problem depends on how much you’ll bring in during your retirement years and how much you’ll pay out. Fortunately, at age 60, you still have enough wiggle room to make any needed changes.

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