Should We Pay Off Our Mortgage? – Andy

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April 21, 2009

Andy wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

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“Dear Steve,

I am 62 years old and had planed to retire in 3 – 3 1/2 years. With the ecomonic problems today my wife and I are thinking aobut taking $29000.00 out of my 401K and pay off our mortgage. I am still employed but things have really slowed down. So don’t know what year end will bring. We had planed to pay off the mortgage the first of next year but we just feel very uncomfortable about what is going on. (Unemployment, bank failures.) We have a 3-4 month emergency fund and no credit card debt. We have a auto loan. Maybe if we hear ours opinons about this it would help.

At age 62 should we pay off our mortgage with funds in my 401K?

Andy”

Steve’s Answer:

Dear Andy,

All the technical points of the situation aside, there is tremendous emotional benefit in not having a mortgage against your house. Without a mortgage, your monthly living expenses will be a lot lower. If you ever need to take money out of your house later on, you could look into a reverse mortgage.

I think it is a given that over time, both the stock market and the house value will rise and nobody knows which will rise faster. Heck, even the super-duper financial advisers don’t know what will happen so making a decision based on what provides you with emotional comfort isn’t all that crazy.

Big hug.

@GetOutOfDebtGuy