# Mortgages and retirement. If mortgage rate is under 4%, should you pay it off? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [May 16, 2024, 1:13pm UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632 "2024-05-16T13:13:28Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Si\_Amigo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/si_amigo/32/2877_2.png) [@Si\_Amigo](https://boards.straightdope.com/u/Si_Amigo)\ **Post date:** [May 17, 2024, 4:14pm UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/21 "2024-05-17T16:14:02Z")
I had autopay and was able to add a payout on principle each month through my banks app. ---
**Author:** ![Saint\_Cad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saint_cad/32/18907_2.png) [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)\ **Post date:** [May 17, 2024, 4:17pm UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/22 "2024-05-17T16:17:41Z")
> [@andrewm](#): > > It’s a lot harder than it used to be to actually get a tax break from deducting mortgage interest. Very true. When taxes changed from smaller standard deduction + exemptions to a bigger standard deduction we now don’t itemize thus lost our mortgage interest deduction. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [May 17, 2024, 7:13pm UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/23 "2024-05-17T19:13:59Z")
> [@What\_Exit](#): > > Seems odd not to have your mortgage on auto-pay. I would think for those with the money, auto-pay is the norm. We paid it off a while ago, before autopay was standard. I’m not sure it was even an option, though we had the mortgage with the bank where we had our checking account. ---
**Author:** ![hajario](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hajario/32/171_2.png) [@hajario](https://boards.straightdope.com/u/hajario)\ **Post date:** [May 17, 2024, 7:16pm UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/24 "2024-05-17T19:16:43Z")
Autopay was standard in the late 90s. ---
**Author:** ![What\_Exit](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/what_exit/32/10652_2.png) [@What\_Exit](https://boards.straightdope.com/u/What_Exit)\ **Post date:** [May 17, 2024, 7:21pm UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/25 "2024-05-17T19:21:47Z")
I’m on my third house, first in 1993. All 3 mortgages have been autopay. ---
**Author:** ![Procrustus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/procrustus/32/2994_2.png) [@Procrustus](https://boards.straightdope.com/u/Procrustus)\ **Post date:** [May 17, 2024, 7:50pm UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/26 "2024-05-17T19:50:11Z")
> [@Si\_Amigo](#): > > I had autopay and was able to add a payout on principle each month through my banks app. I probably could too, but it would require some intervention on my part, which somewhat defeats the purpose of autopay. (“set it and forget it.”) ---
**Author:** ![Napier](https://avatars.discourse-cdn.com/v4/letter/n/ce73a5/32.png) [@Napier](https://boards.straightdope.com/u/Napier)\ **Post date:** [May 19, 2024, 2:37pm UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/27 "2024-05-19T14:37:49Z")
I vote to pay it off. The reason is that it’s nice to know you have no debt, and it’s nice not to have to administer a mortgage payment (including monitoring and updating any autopay). Retirement can be about doing what feels nice to know, and not about getting more money. At least, these things have their own merits. ---
**Author:** ![Joey\_P](https://avatars.discourse-cdn.com/v4/letter/j/919ad9/32.png) [@Joey\_P](https://boards.straightdope.com/u/Joey_P)\ **Post date:** [May 19, 2024, 3:04pm UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/28 "2024-05-19T15:04:30Z")
I’m within spitting distance of mine being paid off. I’ve spent the last 10 years or so throwing every spare nickel at it. Right now the interest rate on my savings account is higher than the interest rate on my mortgage. _Technically_ I should be putting the extra money in savings and then transfer it back to the mortgage the next time the savings rate drops, but my math says that would save me about $50 a year and I’d rather just be done with the mortgage. My “I haven’t given it a ton of thought yet” plan is to make a lump sum payment as soon as it gets to the point that I can repay myself within a year, that should be within the next two years or so. This discussion reminds of a topic that comes up when people are talking about paying down their credit card debt. Looking strictly at the numbers, it’s generally going to make the most sense to chip away at the cards with the highest interest rate first. But I’ve often argued that, from an “I’m overwhelmed” standpoint, sometimes it’s better to knock out some low balances first, even if they don’t have the highest interest rate. So you pay an extra few bucks in interest, but getting one less “OVERDUE” notice each month will feel like an accomplishment. ---
**Author:** ![What\_Exit](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/what_exit/32/10652_2.png) [@What\_Exit](https://boards.straightdope.com/u/What_Exit)\ **Post date:** [May 19, 2024, 5:16pm UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/29 "2024-05-19T17:16:29Z")
If I paid it off, I would then have to manually pay my taxes, so that would be slightly counterproductive. Right now my mortgage, taxes and insurance are all paid through the mortgage company. ---
**Author:** ![P-man](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/p-man/32/3606_2.png) [@P-man](https://boards.straightdope.com/u/P-man)\ **Post date:** [May 19, 2024, 6:21pm UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/30 "2024-05-19T18:21:29Z")
Our financial advisor was fine with us paying off our mortgage (there wasn’t that much left, and I’m a year away from retiring). He basically said it didn’t make much difference either way, and to do what made us more comfortable. ---
**Author:** ![hajario](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hajario/32/171_2.png) [@hajario](https://boards.straightdope.com/u/hajario)\ **Post date:** [May 19, 2024, 6:26pm UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/31 "2024-05-19T18:26:10Z")
The bottom line is do it if it helps your peace of mind. Don’t do it if you want the (possibly incremental) savings. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [May 20, 2024, 12:08am UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/32 "2024-05-20T00:08:22Z")
For most individuals, in most circumstances, any debt you owe will have a higher interest rate than any reasonable investment you could make. That’s how banks stay in business, after all. If that’s the case, then paying off debt is the best investment available to you, and so that’s why gurus usually advise that. But if your case is different, then it’s different. ---
**Author:** ![Munch](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/munch/32/5281_2.png) [@Munch](https://boards.straightdope.com/u/Munch)\ **Post date:** [May 20, 2024, 12:32am UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/33 "2024-05-20T00:32:00Z")
> [@What\_Exit](#): > > If I paid it off, I would then have to manually pay my taxes I have never thought about that! My home insurance goes through my bank, but the tax escrow is conveniently done through my mortgage (like 99% of the rest of ya) - and damn, I honestly have no idea how you do it manually. I wonder if there are escrow services that can help you out for minimal hassle/cost? I now vote you pay off your mortgage so you can navigate this for the rest of us. ---
**Author:** ![Joey\_P](https://avatars.discourse-cdn.com/v4/letter/j/919ad9/32.png) [@Joey\_P](https://boards.straightdope.com/u/Joey_P)\ **Post date:** [May 20, 2024, 12:36am UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/34 "2024-05-20T00:36:51Z")
> [@Munch](#): > > I honestly have no idea how you do it manually. I wonder if there are escrow services that can help you out for minimal hassle/cost? Your city should send you a tax bill. Mail them a check. That’s about it. You don’t need to get any type of escrow involved. In fact, you can probably go online and look up how much your taxes are. Round up a bit, divide by 12 and throw that much into a savings account each month and you’ll have it ready when you get the bill. ---
**Author:** ![What\_Exit](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/what_exit/32/10652_2.png) [@What\_Exit](https://boards.straightdope.com/u/What_Exit)\ **Post date:** [May 20, 2024, 12:38am UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/35 "2024-05-20T00:38:52Z")
Good idea, but I’ll pass. But … For NJ the towns seem to charge quarterly. I can literally walk my check to them in the town hall or pay it like my water bill which is also quarterly and goes through their tax department. An e-check is a flat $1.95 fee, Credit/Debit card is 2.95% which is pretty expensive and of course I can hand deliver the check or mail it to the PO Box for the Town’s Tax Dept. The Insurance is pretty easy, you can just pay them directly. ---
**Author:** ![HMS\_Irruncible](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hms_irruncible/32/7394_2.png) [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)\ **Post date:** [May 20, 2024, 12:46am UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/36 "2024-05-20T00:46:06Z")
> [@Chronos](#): > > For most individuals, in most circumstances, any debt you owe will have a higher interest rate than any reasonable investment you could make. That’s how banks stay in business, after all. How do you reckon? Car loans and mortgages are in the 6.5-8.5% range right now. The S&P500 has returned 12% historically, including over the past 10 years. Maybe you were thinking strictly of fixed-rate investments, or people with terrible credit history? ---
**Author:** ![carrps](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/carrps/32/2957_2.png) [@carrps](https://boards.straightdope.com/u/carrps)\ **Post date:** [May 20, 2024, 12:48am UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/37 "2024-05-20T00:48:37Z")
> [@Joey\_P](#): > > Your city should send you a tax bill. Mail them a check. That’s about it. You don’t need to get any type of escrow involved. Seriously. I get a tax bill. I logon. Submit my payment. That’s it. We didn’t have an escrow account for 90% of the term of our mortgage, and I didn’t miss it at all after if was gone. I also get a notice when it’s time to pay for our insurance. I go online and pay it. It’s not something terribly difficult. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [May 20, 2024, 12:54am UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/38 "2024-05-20T00:54:18Z")
> [@What\_Exit](#): > > But it got me thinking, my mortgage is fairly small and my rate is only 2.625%. I’ll clearly never refinance and I see little reason to pay off the mortgage and collectively we’re earning more than 2.625% on our investments. Even as we go more and more conservative on our investments, I think it shouldn’t drop below 4%. So my thinking is keep the mortgage and keep that money invested. > > I’m in New Jersey, so my property tax is high and I live in a windy Bayshore town so even my insurance is a bit high. Thankfully, no need for flood insurance. Hmm, I would love to have our mortgage paid off as Fire insurance out here is crazy high- $5000- $7000 a year. But in your case- _keep it._ The five states with the lowest Property taxes are 1. Hawaii. 2. Alabama. 3. Colorado. 4. Nevada. 5. Utah Other than Colorado none are that enticing to us. Oddly, with the new tax laws- we just take the standard deduction for the Feds (we might save like $50 itemizing), but we save quite a bit with CA Taxes. ---
**Author:** ![What\_Exit](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/what_exit/32/10652_2.png) [@What\_Exit](https://boards.straightdope.com/u/What_Exit)\ **Post date:** [May 20, 2024, 12:57am UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/39 "2024-05-20T00:57:20Z")
Compared to NJ, states like the Carolinas are plenty cheap. Any tax bill under $2000 would look great honestly. Hawaii might be low tax, but I think it was #1 for cost of living. So not much help to a retiree. As things are warming up despite my best efforts, we might look at Maine. They are considerably cheaper than NJ, but the average is apparently $2756. But we’re not moving for at least 4-6 years. We also may not move. Who knows. ---
**Author:** ![wolfpup](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wolfpup/32/10618_2.png) [@wolfpup](https://boards.straightdope.com/u/wolfpup)\ **Post date:** [May 20, 2024, 1:49am UTC](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632/40 "2024-05-20T01:49:37Z")
> [@Procrustus](#): > > > [@Si\_Amigo](#): > > > > I had autopay and was able to add a payout on principle each month through my banks app. > > I probably could too, but it would require some intervention on my part, which somewhat defeats the purpose of autopay. (“set it and forget it.”) I’m not seeing this. All my mortgages have been on auto-pay, and in fact I’m pretty sure the bank required it. This doesn’t in any way make it more difficult to contribute extra to pay down the principal. It was no more difficult than whatever manual process you’d have to use each month if you didn’t have auto-pay. As for the OP’s question, I have no strong opinion one way or the other, but in general any loan that is substantially below the interest rate you could get from a money market investment is a potential source of profit for you, though tax considerations could considerably change that equation. It’s the tax considerations the really drive the answer here, because otherwise a loan at substantially below market rate is basically free money. In Canada it’s a little simpler because capital gains on a primary residence are never taxed and mortgage interest by the same token is not deductible, and the investment income you get thanks to the bank’s “free money” can be tax-sheltered in a retirement fund. [Previous page](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632.md?page=1) [Next page](https://boards.straightdope.com/t/mortgages-and-retirement-if-mortgage-rate-is-under-4-should-you-pay-it-off/1001632.md?page=3)