Home Refinance

Home refinancing during the pre-retirement years should focus exclusively on strategic retirement preparation.

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Rate-and-term refinancing to lower rates makes sense only if the remaining term is shortened, not extended. Avoid resetting to 30-year mortgages when only 10 years remain. Consider 15- or even 10-year terms if cash flow permits, ensuring mortgage freedom by retirement. The goal is entering retirement with no mortgage payment, maximizing retirement income available for living expenses.

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Cash-out refinancing deserves extreme skepticism during these years. Extracting home equity right before retirement reduces the housing wealth cushion supporting retirement security. Very limited circumstances may justify cash-out refinancing:

• Critical aging-in-place improvements that enable long-term home retention

• Consolidating remaining debt for payoff before retirement if this creates a workable timeline

• Medical expenses if no other options exist

Avoid cash-out refinancing for discretionary purposes or supporting adult children, as your retirement security cannot be compromised.

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Some pre-retirees may consider reverse mortgage evaluation (age 62+), though these are typically better delayed until later in retirement, when home equity access becomes more necessary.

If approaching retirement with substantial mortgage debt, honestly assess whether downsizing might be more appropriate. Moving to a smaller, less expensive property could:

• Eliminate housing debt entirely

• Provide mortgage-free retirement, offering significant financial security and psychological peace

Guiding principle: Every refinancing decision should be evaluated through this lens: Does this improve my retirement security or undermine it?