People over the age of 65 are most likely to be homeowners vs. renters, with 65% of them to be mortgage-free. Mark Miller, journalist with Reuters, says there's a lot of home equity out there, which is a significant asset for many older homeowners.
The financial advisors that Miller has spoken with say to net out the cost of borrowed funds, including the tax break, against a risk-free return, which is where the argument comes into play where it may make sense to pay down a mortgage.
Older homeowners are less likely to be underwater, as they've owned homes longer than people who bought at the peak of the bubble, who are more likely to be underwater, says Miller, adding that about 14% of homeowners over the age of 65 are underwater. He notes that no matter how far underwater you may be, you're still servicing a debt and as long as you plan on still living in the home, the basic math on the debt doesn't change. It's a matter of the efficiency of owning the property, Miller says.
Miller believes the best way to pay off a mortgage is by accelerating the payments when younger, if possible. He knows this is not easy to do if you're of modest means and don't have a pot of asset that can be traded off for the mortgage.
For people at retirement, if they haven a significant amount of assets, they need to ask "what's the holistic view of their balance sheet," as you can't just look at it as two different buckets, advises Miller.
Of the different strategies out there to tap into the equity of the home, including reverse mortgages, Miller recommends downsizing as an excellent way to extract equity without borrowing against it and invest in those proceeds.