How to deal with a mortgage in your 50s and 60s

By Jay Fitzgerald

By taking out a 10-year mortgage, Gerry White shaved two years from his old mortgage-payment schedule.

Gerry White, 51, wanted to make sure the mortgage on his Stoughton home was paid off before he retires in 14 years as a computer systems administrator. So he refinanced his three-bedroom home into a 10-year mortgage at today’s super-low interest rates.
The result: He figures he’ll save tens of thousands of dollars in mortgage payments over the next 10 years, stash the extra bucks in a 401(k) account, and cruise into retirement at 65 without owing anything on his home.
“I thought it was crazy to have a mortgage when I retire,’’ White said. “I’m trying to play catch-up on my retirement savings and get everything in order. This helps.’’

It’s a challenge that faces many people in their 50s and early 60s: how to save as much money as possible for retirement while eliminating the largest monthly household expense - a mortgage payment.

Financial advisers and specialists agree that it’s almost always beneficial for people to have paid off their mortgages around the time they retire.
The rationale is simple: You don’t want a big monthly payment eating up large chunks of your savings fund after retirement.
It’s especially important for people in their 50s and early 60s, who can see retirement looming on the horizon, to start making precise, sometimes tough projections about their savings, mortgages, and future expenses.
But every situation is different.
First-time home buyers
Should first-time home buyers in their 50s and older even consider taking on a mortgage at such a later stage in their working lives?
After all, most mortgages are for 30 years - and taking out a first-time mortgage at this point in their lives would mean paying off mortgage balances well into their 80s.
The answer is a tentative “yes.’’
Home prices and interest rates are both low these days, making home purchases an attractive option for many people, including those 50 years old and above.
“Money is so cheap right now,’’ said Michael S. Tucci, president of Lexington Wealth Management in Lexington. “People can lock in set prices for mortgages at really low monthly payment rates. . . . At today’s prices, mortgage payments may look small 10 or 15 years from now compared to rental prices.’’
People can also take out shorter 15- or 10-year mortgages to cut down on the number of years they pay off loans, if they can afford the higher monthly payments that come with shorter-term deals, Tucci said.
Another way to pay off mortgages early: Make an extra monthly mortgage payment each year, or 13 payments in all each year. Over the years, such a move could cut a year or more off of mortgage payments, Tucci said.
Fifty- and 60-somethings can make a larger-than-normal down payment on a home or condo, reducing monthly mortgage costs and making shorter-term loans more financially feasible, experts agree.
Finally, there’s the ultimate solution to making sure a house is paid off before retirement arrives: Pay cash.
About one-third of homes and condos sold this year in Massachusetts were purchased with cash, according to the Warren Group, a Boston company that tracks local real estate.
Refinancers
For many people, refinancing a home at today’s low interest rates can save big bucks. The savings could then be plowed into retirement accounts over the years.
Gerry White took the logic one step farther. He not only refinanced his Stoughton home; he also saw an opportunity to reduce the total number of years that he shells out money for mortgage payments.
His mortgage interest rates fell to 3.25 percent from 5.5 percent because of his refinancing. But by taking out a 10-year mortgage he also shaved off two years from his old mortgage-payment schedule.
He estimates he’ll save $30,000 in the process, allowing him to sock more money away into his retirement accounts.
“I’m paying about the same amount per month for my mortgage, so there was no question I needed to do this,’’ he said.
John Battaglia, president of Cambridge Mortgage Group, which handled White’s refinancing, said he’s seeing a lot more people in their 50s and 60s coming in to refinance their homes - and putting mortgages into shorter-term 10- and 15-year loan plans.
“They’re really trying to build equity and pay off their mortgages at the same time,’’ Battaglia said.
A cautious approach
But first-time and existing homeowners need to be cautious.
As attractive as it might be to have no mortgage payments upon retiring, retirees still need cash to pay for electric, cable, phone, property taxes, and other basic home-related expenses - not to mention food, clothes, trips, cars, and supplemental health insurance.
An overly aggressive approach toward paying off mortgages can harm efforts to save necessary cash.
“You have to find a balance between paying off a mortgage and saving up money,’’ said Greg McBride, senior financial analyst at Bankrate.com.
Jay Fitzgerald can be reached at jayfitzmedia@gmail.com.