Keep the Mortgage or Pay Off the House?

As retirement approaches and you look for ways to save, eliminating your house payment can seem like an obvious choice. But is paying off your mortgage the right answer? Busey’s team of experts say… it depends.

Consider your home equity as part of your retirement—and analyze it as such. For example, if your mortgage is four percent and your money market is only earning one percent, you may be better off using the money market funds to pay off the mortgage.

If you keep your mortgage, your retirement savings remain intact, as does the tax deduction that comes from your monthly payment. However, downsides include the pressure of having a monthly payment during retirement and leaving a financial burden for your heirs.

But, if paying off your mortgage requires dipping into your 401(k) or reducing your contributions, then that decision isn’t advised. In fact, you may end up paying or losing more than you save—when you consider taxation at your highest tax bracket plus the potential loss of an employer’s matching contribution.

If you want to pay off your mortgage now but can’t make it happen right away without leveraging your 401(k), consider making extra payments instead. You’ll shorten the term of your mortgage without penalizing your retirement fund.

Above all else, consider the tax implications before making a decision on ending your mortgage.


When to Keep Your Mortgage:

  • You plan to sell your home soon.
  • You have a large mortgage but little equity.
  • You have higher interest debt than your mortgage.
  • You would have to pull money from your 401(k).
  • You have recently refinanced.
  • You would have to reduce or stop 401(k) contributions.


When to Pay Off Your Mortgage:

  • You have enough money in taxable accounts to cover it.
  • You will be living on significantly reduced income in retirement.
  • You aren’t itemizing taxes (and won’t get a deduction).
  • You want the peace of mind.
  • You don’t want to leave your family with debt.
  • You can add an extra monthly payment without sacrificing savings.


Not sure whether you should stay or pay? Busey Home Mortgage can help you analyze your options and find the choice that’s right for you. For more financial insights, read The Pillar, Buseys financial magazine, on the Publications page or visit and call 1.800.67 | Busey for additional resources.

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Investment Products and Services are: Not FDIC INSURED | May lose value | No bank guarantee


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I may do it all, but I have not done it all.

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