Mortgages Pro and Con


If you pay off your mortgage before you retire, or sell your home to move to a smaller "empty nester" home that is paid for, you will likely face tax bills at the end of the year. If you have had mortgage payments or lease payments, you may have thought little about tax payments, because they are often part of escrow.

If your home is paid for, you will probably receive tax bills from many taxing authorities the last couple of months each year, and the totals may be scary, unless you have noted your tax bills that are paid by escrow accounts.

These taxing authorities depend on where you live. Often they include school, city, county, and other taxing authorities (that you may have voted for years ago) such as transportation, hospital, emergency medical, and others.

If your home is fully paid for, then these tax bills that all come about the same time may be too large to handle. In addition, depending on where you live, these tax bills may grow over the years, becoming much harder to handle, and eating up your investments for retirement.

An additional question is do you want family members to inherit the home — your spouse or partner or a particular child as named in your will or others? If so, paying rising tax bills can become painful.

Some suggest that at retirement we have a relatively small mortgage payment that includes an escrow account that takes care of your tax payments and your home insurance. If taxes or insurance increase, the escrow account will increase but only a monthly one-twelfth.

If you can set aside monthly enough to pay large annual insurance and tax bills, then you are in a blessed and elite group, who never reach into set aside funds for some present need or wish.

Hopefully listing these factors helps to plan ahead for a retirement that will be as fruitful and pleasant as possible.

Copyright © 2006 John F. Yeaman