Data collected by NASDAQ suggests that while only 28% of homeowners below retirement age have paid off their homes, nearly 63% of those 65+ have done so. These statistics highlight Americans' importance in entering retirement with freedom from what is usually their highest monthly fixed cost.
However, everyone's personal financial circumstances vary and you should focus on repaying your debt at your own pace. The average age for having your mortgage paid off in 2023, is anywhere from 50-64 years, with most managing it by 62*, so don't worry about racing others to any kind of finish line.
More Americans are entering retirement with mortgaged homes, and the average balance of those loans is rising. The share of Americans ages 75 and over who are carrying mortgage debt has risen steadily for decades, according to the federal Survey of Consumer Finances: from 5% in 1995 to a historic high of 25% in 2022.
Similarly, states along the Pacific Coast—where home values skyrocketed during the pandemic—have some of the lowest rates of free-and-clear homeownership among the working-age population. California (22.7%), Washington (22.8%), and Oregon (22.9%) sit at 45th, 44th, and 43rd out of all 50 states, respectively.
In fact, the average millionaire pays off their house in just 10.2 years. But even though you're dead set on ditching your mortgage ahead of schedule, you probably have one major question on your mind: How do I pay off my mortgage faster?
You should aim to be completely debt-free by retirement, and after age 45 you can begin thinking more seriously about pre-paying your mortgage. The opportunity cost of paying off your mortgage before investing for retirement is very high when you are young.
Mortgage debt remains uncommon among homeowners age 65-plus relative to their younger counterparts; in fact, the fraction of homeowners age 65-plus who had a mortgage in 2022 (34 percent) was less than half that of homeowners under age 65 (70 percent) 3.
In 2022, nearly 40% of U.S. homeowners owned their homes outright, according to Census Bureau data analyzed by Bloomberg. In total, 33.3 million single-family homes and condos were mortgage-free, a 31% increase compared to 25.4 million homes a decade ago.
When you withdraw funds from pre-tax retirement accounts to pay off a home loan, you typically create a substantial tax bill. Those costs may offset any benefits you get from getting rid of the mortgage debt. You pay a large tax expense today instead of paying modest interest charges in the coming years.
"Shark Tank" investor Kevin O'Leary has said the ideal age to be debt-free is 45, especially if you want to retire by age 60. Being debt-free — including paying off your mortgage — by your mid-40s puts you on the early path toward success, O'Leary argued.
For example, if you plan to travel frequently in retirement, you may want to aim for 90% to 100% of your pre-retirement income. On the other hand, if you plan to pay off your mortgage before you retire or downsize your living situation, you may be able to live comfortably on less than 80%.
There is no specific age to pay off your mortgage, but a common rule of thumb is to be debt-free by your early to mid-60s. It may make sense to do so if you're retiring within the next few years and have the cash to pay off your mortgage, particularly if your money is in a low-interest savings account.
The average household has about $6,100 in credit card debt, but that number varies by demographic factors including age, family structure and education. Couples with children have higher credit card balances than singles and those with no children, carrying an average of $7,050 in credit card balances.
47% of Americans have lived in their homes for six to 10 years. 35% of homeowners have lived in their homes for 10 to 15 years. 16% have lived in their homes for less than five years. The average length of homeownership years is eight years.
When you take out a mortgage, you agree to repay the loan over a set timeframe, typically 15 or 30 years. Paying off your mortgage ahead of time can have a lot of benefits for homeowners — including paying less interest, earning equity in your home faster and dropping mortgage insurance earlier.
One of the most significant benefits of paying off your mortgage is the peace of mind that comes with owning your home outright. Without a mortgage, you don't have to worry about monthly payments, which can be especially comforting in retirement or during economic downturns.
27% of U.S. adults have no emergency savings, as of May 2024 polling — the highest percentage since 2020. People are working hard on their finances.
The Bottom Line
Nearly 40% of homes were owned outright in the U.S. between 2017 to 2022. 1 Older people who want to keep costs down as they age can benefit from not having a mortgage, as can younger individuals and families who want to live frugally while setting aside more funds for other savings and investments.
That makes sense, of course, as older Americans have had a longer time to make payments. But with nearly two-thirds of retirement-age Americans having paid off their mortgages, it means that the average age they have gotten rid of that debt is likely in their early 60s.
Absolutely. The Equal Credit Opportunity Act's protections extend to your mortgage term. Mortgage lenders can't deny you a specific loan term on the basis of age.
Determine your maximum monthly mortgage for a $70,000 salary
To calculate your maximum monthly mortgage payment, multiply your gross monthly income by 0.28. On a $70,000 income, your monthly mortgage payment should be no more than $1,633.
The typical age of a first-time homebuyer is 35, according to 2023 data from the National Association of Realtors. If you're well under that, you're ahead of the curve. Many reasons for waiting, according to NAR, are due to limited inventory and high prices.
Paying off your mortgage early frees up that future money for other uses. Your mortgage rate is higher than the rate of risk-free returns: Paying off a debt that charges interest can be like earning a risk-free return equivalent to that interest rate.
Well, there's no one-size-fits-all answer here, but generally, it's a good idea to ease them into it when they're around 16 to 18 years old.