Mortgage or not to mortgage? That is the question.
Hi Terry,
Can you offer some advice regarding a difference of opinion between my wife and I?
For some background: when my wife and I retire in 3-4 years (approx 2025 or so), we want to buy a house in the budget of around $300,000. In 2025, we’ll be 64 years old. We can possibly have around $750,000-$900,000 at the time of retirement (some in stocks and bonds, some in 401k, IRA). We likely will not take social security until 2 into retirement (holding off as long as that to get a little bit more from Uncle Sam). I was guesstimating approx. $53,000 combining yearly Social Security for my wife and I.
Upon the time that we retire in 2025, my wife suggests that we put down between $225,000-$250,000 in cash, then for the rest, we should get a small mortgage (maybe borrowing between $50,000-$75,000.. maybe even more). On the other hand, I was wondering if we should pay for the property outright (the entire $300,000 in cash… no mortgage.
Although her rationale makes sense… she says that we shouldn’t dump such a large amount of our money into the house so that we can have some liquid to live on. Additionally, we could have a tax write-off. But on the other hand, I was wondering that if we don’t have a mortgage at all, we have more money each month that we don’t have to pay a mortgage.
What are you thoughts?
Thanks for your input.
Terry Says
I’m going to duck this — because a LOT can change in 3-4 years — especially mortgage rates!
Generally speaking, you’re going in the right direction. But you should see if you can work longer and avoid taking SS until age 70, for sure.
You definitely need liquidity in retirement for unexpected expenses.
But one thing is sure: you’ll have a very tough time getting a mortgage after you are retired!! Typically banks are reluctant to make mortgages to retirees — even those with good retirement income!
What you REALLY need is a trusted Financial Planner who can help you go through all these scenarios– one who charges a fee only, and is not trying to sell you stuff. Find one using this link. This is the perfect time to start planning.
