Personal Finance

3 Reasons Why Having a Mortgage in Retirement Isn't So Bad

Maurie Backman

Published: February 8, 2025 8:53 am

It’s natural to have certain goals you want to meet in time for retirement. Those could include having a certain amount of money in your IRA or 401(k), or having a specific amount of cash in the bank.

One common goal pre-retirees tend to try to hit is paying off their mortgages. And it’s easy to see why.

If you’re able to enter retirement mortgage-free, you’ll have one less major expense to worry about at a time when you’re transitioning into a new financial situation.

But before you rush to try to get your home loan paid off ahead of retirement, recognize that there can be some benefits to carrying a mortgage even once you’re no longer working. Here are three reasons why having that mortgage later in life may not end up being a bad thing at all.

1. You can deduct your interest

The mortgage interest deduction is available to people who itemize on their tax returns. Toward the end of your mortgage, that deduction may not be so valuable, since more of your money may be going into your loan’s principal. But combined with other deductions, it could lead to a nice tax write-off.

2. You can potentially make money in today’s interest rate environment

A lot of people refinanced their mortgages during the pandemic, when interest rates plummeted to record lows. Back then, it was more than possible to lock in a home loan at under 3% if you had good credit.

If you’re paying a very low interest rate on your mortgage, then keeping it in retirement could actually enable you to earn money. Even with a few interest rate cuts in late 2024, high-yield savings accounts are still paying close to 4%.

If you have a $40,000 mortgage balance at 2.9% but your savings account is paying you 3.9%, then it doesn’t make sense to pay off that balance even if you have the money. You’ll earn more on your savings in the near term than what you’re paying to carry a mortgage balance.

3. You can keep more of your assets liquid

In the grand scheme of the various assets you might own, your home is quite possibly your least liquid. Your most liquid? Cash.

That’s another reason it’s not a bad thing at all to have a mortgage in retirement. As long as you can afford your monthly payments, you might as well keep your extra cash in the bank, as opposed to tying it up in your home.

At a time when you’re no longer earning a paycheck, having access to more cash isn’t a bad thing. And extra cash buys you more protection in the face of stock market volatility.

If you’re thinking about paying off your mortgage ahead of retirement, before you do, you may want to consult a financial advisor and see what they recommend. An advisor can look at your total financial picture and help you decide whether to kick off your senior years mortgage-free or carry that loan until it’s paid off for good, or until you’re ready to move on from your current home.