5 ways to make it possible to pay off your mortgage by the time you retire

Want to be mortgage-free by retirement? Here’s your game plan.
Retirement can be a financially stressful period. That’s because many people move over to a fixed income during retirement, and at that point, they need to live on less income than what they made while working full-time. As such, it’s a good goal to aim to have your home paid off by the time retirement rolls around. If you follow these five steps, that goal may be more than attainable.

1. Don’t over-borrow to start with
The more affordable a mortgage you take out to begin with, the easier it will be to pay off. Before signing up for a home loan, run some numbers to see what mortgage amount works well for your budget, keeping in mind your total monthly housing costs, including your mortgage, property taxes, and insurance, should not exceed 30% of your take-home pay.

2. Be mindful of your mortgage’s term
If you’re buying a home a bit later in life but want to make sure it’s paid off before retirement, you’ll need to choose your loan term carefully. If you’re 45 years old and think you’ll retire at some point in your 60s, you may want to stick to a 15- or 20-year loan. If you take out a 30-year loan, you’ll have lower monthly payments, but your home may not end up getting paid off by the time your career wraps up.

3. Make your mortgage payments every two weeks instead of once a month
Most home loans are set up so borrowers make a payment once a month. But if you split that monthly payment into two equal payments and make it every two weeks, you’ll pay off your mortgage a bit sooner. That’s because the math will work out in a way that has you making an extra payment every year.

4. Pump bonus cash into your mortgage
You may come into extra money here and there, whether it’s a bonus at work or a tax refund. If you put that cash into your mortgage, you’ll have a greater chance of paying it off before you retire.

5. Refinance when rates come down – and sign up for a shorter loan term
When mortgage rates drop, refinancing could make it possible to speed up your repayment schedule without taking on much higher costs – and get your home paid off within the time frame you’re hoping for. Say you have 19 years left on your 30-year mortgage. If you refinance to a 15-year loan, you’ll be that much more likely to be housing debt-free by the time retirement rolls around. And if rates are competitive enough, you may not raise your monthly mortgage payments that much.

Though carrying a mortgage into retirement isn’t always such a terrible thing, you may not want the burden of a home loan payment at that point in life. Follow these five steps to increase your chances of having your home paid off on a schedule that works for you.

Maurie BackmanThe Motley Fool