Getting retired soon ? should I pay off my mortgage early?

Posted by Adam Martin on July 12th, 2018

A mortgage is defined as a deal done with a bank or other financial institution to provide a loan in exchange for certain valuable possessions. People can get a loan by keeping their gold, houses, land, etc. for the mortgage. Top financial advisory firmsare present all over the world to tell people about the mortgage schemes and when is the right time to pay the mortgage. Paying off the mortgage is important because if it is not done then according to the agreement, the bank or the financial institution has the right to own the things that a person has kept as mortgage.

•          The wrong time to pay a mortgage: 

Paying off the mortgage after retirement is not a good time. The pension that a person gets at retirement will directly go to the bank if he/she has not paid the mortgage yet. The money in the account will thus, be recognized as income and not as pension, due to which the tax and penalties may increase. A person who waits until retirement to pay off the mortgage can land in trouble due to the income tax and penalties imposed on his/her bank account. If the person is not able to pay the amount, then the financial institution can even file a case or would eventually claim the mortgage. 

If a person has availed a loan for building a house by keeping the land in mortgage, then he/she should be able to pay the mortgage before the age of 60, i.e., before retirement. If the person fails to repay, the bank has the right to claim the land. It is, therefore, best advised to pay off the mortgage before the retirement age.

•          The right time to pay the mortgage: 

The correct time to pay the mortgage would be as soon as possible. It is better to clear off the mortgage from early stages by paying the amount of loan. The loan taken can even be paid in installments. A person who has an agreement regarding the loan for the mortgage can clear it off by installments too. It is always better to do this instead of waiting till retirement.

 Paying off the mortgage at an early stage, won't affect your bank account and there won't be a risk of an increase in tax, as it is there while paying the mortgage after the retirement. Not only the loan, but even the interest should be paid earlier. A person can first clear off the loan and then start by paying the interest as it won't be much. Interest rates are added per month until a person clears off the loan. If a person can clear the loan in six months, then he/she would only have to pay the interest added for the six months after which he/her could claim the mortgage. If a person waits until retirement, then the interest rates will be added until that time, and it would sum up to a large amount that can be difficult to pay at once. Even after clearing the loan, if a person has not paid the interest, he/she can't claim the mortgage.

 Therefore, professional advisors advise their customers to pay off the mortgage as soon as possible.