Should You Consider Refinancing Your Mortgage Before Retirement?

Should You Consider Refinancing Your Mortgage Before Retirement?

This is a question that is almost never asked during retirement planning, but it definitely should be. For many of us, we will not ever pay off our home in full, nor are we willing to downsize due to our ego and/or our unwillingness to give up the lifestyle we have come accustomed to throughout our working years. For those of us in those scenarios, we should be looking at what the right time is to refinance shortly before retirement. For example, if you are currently in the 5th year of a 15-year mortgage, you may be paying $2,000/month. If you retired right then, that would be your payment for the next 8 years while you have a severely-reduced income. On the other hand, if you were to go and refinance your mortgage into a 30-year mortgage right before retirement, you might lower your payment to $1,200/month. While you would be paying longer, you would free up $800/month in cash flow during retirement. This will, again, give you much more financial flexibility during retirement. In addition, you will still be gaining equity in your home as you make the payments, so you will likely be able to sell the house in the future if you need to resort to downsizing. More importantly, if you refinance, you can continue to pay the $2,000/month if you want to, and pay off your mortgage just as fast as you would have in your current scenario. The best part about the refinance option is that if something goes terribly wrong, or something unexpected happens, you can immediately lower your payment from the inflated $2,000/month down to the required $1,200/month. If you were to try to do that under your old arrangement, you would be foreclosed on almost instantly. In addition, if you were to try to refinance your mortgage during retirement right after something unexpected happened, when you have little or no income, you are very unlikely to get approved for a loan. The bottom line is that refinancing gives you more flexibility, more cash flow, protects you from unexpected surprises, and still allows you to pay off your mortgage just as fast if you decide to continue to make the $2,000/month payment. Please consider this option in the few years before you retire.

Retirement Junkie is a website that the Hagopian Institute put together as a source for free information to help people prepare for retirement.  Please visit, and follow MrEmergingMedia on Twitter for more retirement tips, along with other fun offerings from Todd Hagopian and the Hagopian Institute.

About Todd Hagopian (@ToddHagopian)

Todd Hagopian received his BA from Eastern Michigan University with a major in Political Science. After graduation, he worked as a Financial Advisor and a Bank Manager before returning to school. He attended Michigan State University, where he completed an MBA with a double-major in Finance and Marketing. Todd is now a Senior Product Development Manager for a Fortune 500 company. He frequently writes about business issues, social media strategy, and political issues that he finds important. Enjoy the blog!

Posted on December 31, 2011, in Investing and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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