Getting Personal
Downsizing
Question: My wife and both turn 50 this year. Our son is graduating college and our daughter enters college this fall. We are downsizing into a smaller home, purchasing with cash. We'll then sell our current home. I've looked forward to being "mortgage-free" for some time, but several of our friends suggest losing the tax advantage is a bad financial move. Chris, what is your opinion? Tom, Charlotte, NC.
Answer: First of all, from a financial point of view it's really smart to make a downsizing move while you're still working. You'll save a lot of money--no mortgage, lower property taxes, cheaper utility bills, and so forth--and you can salt away at least some of that money for later on. In a sense, it's a smart savings strategy. Secondly, I don't think the mortgage deduction is all that important to your bottom line. Sure, it helps. But it's far better to enter your Golden Years owning a home without a mortgage. This way you have a solid equity foundation for your overall portfolio. Go for it
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Comments (1)
April 16, 2008 3:51 PM PT
Not sure where you live currently or what type of market this is, but you probably are selling your home at a low point in the real estate market.
You might consider renting out your home if there is a market for this. You could use a real estate management company to do this. They take care of all the ugly details of renting (contracts, evictions, etc.) for a small monthly fee. Doing this for a number of years might give you income and allow the value of your house to rebound.
Just my 2 cents...