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Question for the Money Doctors

Question submitted on Jun 23, 2014.


is better to take a mortgage out or pay cash for a home when I retire?


In order to better answer this question, we need to know your financial situation.  Some considerations include:

1.   What is your annual cashflow in retirement?

2.   What are your assets and liabilities in retirement?

3.   What is your expected tax bracket in retirement?

There are pros/cons in having or not having a mortgage on your home.

If you pay cash for a home now, but decide to get a mortgage on it later, not all of the mortgage interest may be deductible.

If you are in a low tax bracket and expect to be in a low tax bracket, the mortgage deduction may not be worth that much to you.

If your financial reserves are thin, it may not be a good idea to tie up all your cash in your home. 

Is your cashflow sustainable to pay a monthly mortgage payment?

The big advantage of getting a mortgage now is the historic low interest rates.   Getting a mortgage will help you preserve your assets, but they must be managed appropriately.

A comprehensive tax and financial planning analysis should be done to see the pros/cons of having a mortgage for your situation.

Take a look at the articles on your website at 360 Degrees of Financial Literacy.  

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