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Paying off your mortgage before retirement sounds like a no-brainer, right? Owning your home outright and getting rid of that monthly payment could put your finances on solid footing. Not having to pay such a substantial bill in retirement is particularly beneficial in retirement, when your income may not be what it was during your working years.
While the primary benefits are clear, there are some situations where paying off your mortgage early may not be your best option. Here's how to determine whether to pay off your mortgage before retirement and how to make it happen.
Should You Pay Off Your Mortgage Before Retirement?
Paying off your home is a major milestone, one that could add financial stability to both your working and retirement years. It's a worthwhile strategy for many homeowners, but not everyone.Here are a few reasons you may want to pay off your mortgage early and a few reasons you might not.
Reasons to Pay Off Your Mortgage Early
About 41% of homeowners ages 65 to 79 carry a mortgage well into retirement, according to the Harvard Joint Center for Housing Studies. Paying your mortgage off before then can offer several emotional and financial benefits, such as:
- You'll save on interest payments. When your mortgage payment disappears, so do the interest charges that come with it. The earlier in your loan term you pay off the principal balance, the more interest you could save. Over a loan term, total interest on a mortgage can reach into the hundreds of thousands of dollars.
- You'll free up income. Mortgage payments represent a significant portion of your expenses, if not your largest expense. Wiping out your mortgage can lift that burden, which is especially helpful if you'll be on a fixed income in retirement. Instead of paying principal and interest payments each month, you can direct that money to retirement, investments and other financial goals.
- You may earn more by paying down your loan. If your mortgage rate is higher than what a safe investment like a CD or high-yield savings account account would pay, paying off the loan may deliver a better return. If your mortgage charges 6% interest and a long-term CD pays 4%, for example, the money you put toward the mortgage can save more than you would earn by investing it.
- You'll build equity faster. As you pay your mortgage over time, you build equity in your home. The more equity you have, the more ability you have to put it to work, such as through a home equity line of credit (HELOC) or home equity loan.
- You may enjoy more peace of mind. The emotional reward of being debt-free may be just as valuable as the financial one. Knowing you'll always have a roof over your head can give you a sense of security that's hard to put a price on.
Reasons Not to Pay Off Your Mortgage Early
Paying off your mortgage early can free up income, but there are potential drawbacks you may want to consider first.
- Your budget will be tighter. To pay off your mortgage early, you'll need to add extra funds to your loan payments, which could strain your budget. Make sure your budget can comfortably handle the short-term squeeze before committing to higher payments.
- You may sacrifice retirement savings. If you're not already maxing out contributions to retirement accounts like a 401(k) or IRA, putting extra money toward your mortgage instead could cost you long-term growth. Those accounts grow tax-deferred or tax-free and can compound into more than the interest you'd save by paying off your mortgage early.
- You could get better returns from investing. While paying off your mortgage saves you the interest you'd owe, putting that money in the stock market instead may earn higher returns over time. Historically, the S&P 500 has returned about 10% annually since 1957 and about 11.5% over the past 40 years, as of December 2025. If your mortgage rate is well below that, investing could put you further ahead. However, if you're close to retirement, it may not be as much of a concern.
- You'll lose some liquidity. Putting extra money toward your mortgage builds equity faster, but that equity isn't easy to access. If you ever need that money, you'll likely have to borrow against your home or sell it to get the funds.
- You'll lose tax benefits. If you itemize your taxes, you can deduct the interest you pay on your mortgage. Once your mortgage is gone, though, you won't have that deduction, and you could pay more when you file your tax returns.
How to Pay Off Your Mortgage Before Retirement
Follow these steps to eliminate your mortgage before you set your out-of-office reply to "out for good."
1. Crunch the Numbers
As with any financial decision, it's wise to do your due diligence and run the numbers beforehand. Start by reviewing your mortgage terms and payoff timeline. You may find you're already on track to pay it off before retiring. If you're not, estimate your remaining balance at that point and how much you'd need to pay it off.
2. Determine What You Can Afford
Review your budget to see how much extra you can put toward your mortgage each month, quarter or year. Choose an amount that won't leave you short on bills or keep you from achieving your other goals. Consider consulting a financial advisor to help you create a realistic plan.
3. Create a Plan for Additional Payments
Making additional payments could help you accelerate your payoff timeline. Here are a few ways to do that.
- Add an extra amount to each monthly payment. Use Experian's extra mortgage payments calculator to see how different monthly amounts could affect your payoff date and total interest.
- Set up an extra automatic payment each month or year. On a 30-year loan, one extra payment each year could shorten your payoff time by five or six years, depending on loan balance and terms. One way to do that is by making biweekly mortgage payments instead of monthly, which works out to one extra payment per year.
- Apply windfalls to your mortgage. Put tax refunds, work bonuses or inheritances toward the principal to reduce your balance faster.
Tip: Make sure your lender applies any extra money you send to the principal balance, not next month's payment. Some lenders won't do this automatically, so you may need to specify it each time.
4. Consider Refinancing
A rate-and-term refinance could shorten your loan term and help you pay it off faster, typically with a lower interest rate. For example, if you replace a 30-year loan with a mortgage for 15 or 20 years, you'll shave years off your payoff date and reduce the total interest you owe. Be aware, your monthly payment will increase and you'll owe closing costs on the new loan, but you'll be mortgage-free sooner and pay less in interest over time. You could also recast your mortgage by making a lump-sum payment to lower your monthly payment without changing the term.
How Paying Off Your Mortgage Early Can Affect Your Credit
Paying off your mortgage can improve your overall financial picture, but it may have a small, temporary impact on your credit score. When your mortgage account closes, your score could dip slightly for two reasons:
- Credit mix: The variety of your credit accounts makes up 10% of your FICO® Score☉ Θ. With the mortgage gone, there's one less installment loan on your report, which can influence your score, especially if you don't have any other ones.
- Length of credit history: When you close an older mortgage, it can lower the average age of your remaining accounts. That may slightly hurt your score. This factor makes up about 15% of your FICO® Score.
Keep in mind, any dip in your credit score is usually temporary. With consistent, on-time payments on your other credit accounts, your score will typically recover over time.
The Bottom Line
The benefits of paying off your mortgage before retirement are hard to beat, but before you proceed, make sure it's right for you and your financial situation. Run the numbers and weigh the reasons for and against it to help you decide. It may be wise to talk it through with a financial advisor for personalized guidance.
Eliminating a major expense like your mortgage may improve your overall financial health, but don't forget about your credit health. Consider signing up for free credit monitoring with Experian to track your score over time and get alerts whenever something changes on your credit report.