Advice on Refinancing Your Mortgage, Liz Weston - AARP The Magazine

Should You Refinance

When it comes to refinancing a mortgage timing is key

Dear Liz: My husband and I might to a shorter loan so we can pay off our house by the time we retire. The steeper monthly payments, however, are daunting. How do we decide? Photo by Art Streiber Financial expert Liz Weston. Being debt-free in retirement is a worthy goal, and make refinancing all the more tempting. But don't opt for a shorter mortgage if the higher monthly payments significantly reduce your contributions to your 401(k) or other retirement accounts. Ian McKinnell/Getty Images House built of coins and banknotes, close-up Remember, your retirement contributions typically score you a (and matching funds, if your company offers them). Your money can also grow tax-deferred. These big benefits typically swamp the relatively low-interest savings you would get from paying off a mortgage. You should also say no to a shorter mortgage if you're carrying any higher-interest debt, such as credit-card bills, auto loans, or education loans. These debts typically aren't tax-deductible — another reason they should be paid off before you tackle a mortgage.

Refinancing Your Home 3 Tips

1. There's no true "no-cost" refinance. Costs are folded in as a higher interest rate. 2. Refinancing to lower your payment? Be sure you can recoup the costs in two years. 3. Opt for a fixed rate; inflation may rise before you can pay off a variable-rate loan. Carrying Costs
More and more Americans are still paying a mortgage as they start their retirement years. And according to the latest Federal Reserve statistics, the amount of home-secured debt owed by people ages 65 through 74 also grew between 2004 and 2007, to a median amount of approximately $69,000. Liz Weston, author of Your Credit Score: Your Money and What's at Stake, blogs at .

Related

Cancel You are leaving AARP.org and going to the website of our trusted provider. The provider’s terms, conditions and policies apply. Please return to AARP.org to learn more about other benefits. Your email address is now confirmed. You'll start receiving the latest news, benefits, events, and programs related to AARP's mission to empower people to choose how they live as they age. You can also by updating your account at anytime. You will be asked to register or log in. Cancel Offer Details Disclosures

Close In the next 24 hours, you will receive an email to confirm your subscription to receive emails related to AARP volunteering. Once you confirm that subscription, you will regularly receive communications related to AARP volunteering. In the meantime, please feel free to search for ways to make a difference in your community at Javascript must be enabled to use this site. Please enable Javascript in your browser and try again.