Home refinancing during the empty nest years presents unique considerations focused on retirement preparation.

​

Rate-and-term refinancing remains appropriate if interest rates have dropped significantly, but carefully consider the remaining loan term:

• Extending into a new 30-year mortgage when 10–15 years remain dramatically increases total interest and pushes debt deeper into retirement.

• A 15-year refinancing may be preferable if cash flow permits—slightly higher payments but substantially reduced total interest and guaranteed mortgage freedom by retirement.

 

Some empty nesters pursue cash-out refinancing for specific retirement preparations:

• Funding final college expenses for younger children

• Consolidating higher-rate debt

• Making aging-in-place home improvements

 

However, extracting home equity during pre-retirement years reduces the housing wealth cushion supporting retirement security. Be extremely cautious about using cash-out refinancing for discretionary purposes—lifestyle expenses, vacations, or adult children’s financial support.

 

The primary goal should be entering retirement with minimal or no mortgage debt, maximizing retirement income available for living expenses. Some strategies involve maintaining mortgage debt for tax deductions or to preserve liquidity for investment opportunities, but this requires sophisticated financial planning and sufficient retirement income to comfortably carry debt.

 

For most empty nesters, aggressively paying down or eliminating mortgage debt provides peace of mind and financial flexibility during retirement. Consider:

• Biweekly payment arrangements

• Additional principal payments rather than refinancing, if the current rate is reasonable