Second mortgages during the pre-retirement years are almost universally inadvisable. These final working years should focus on debt elimination, not debt accumulation. Adding second-mortgage obligations right before retirement contradicts sound retirement preparation.

• Fixed payments will continue into retirement, reducing discretionary income when flexibility is most valuable.

• While home equity typically peaks during these years, this equity represents a crucial retirement security cushion for future long-term care costs, unexpected medical expenses, or estate legacy.

• Second-mortgage interest rates, higher than first mortgages, create ongoing expenses that could instead fund retirement accounts.

 

Key considerations if contemplating a second mortgage:

• Question the underlying need: Is this expense truly necessary, or discretionary?

• Can the expense be delayed until retirement funds are accessible?

• Could downsizing fund this need while improving overall retirement financial position?

 

Rarely justified second-mortgage purposes at this stage include:

• Critical home improvements for aging in place that cannot be delayed, such as:

  • Accessibility modifications

  • Major systems replacement

  • Safety improvements

 

Even in these cases, explore alternatives:

• HELOCs offer more flexibility at lower cost if emergency access isn’t required

• Personal loans may suffice for smaller amounts

• Delaying the expense until retirement may be possible

 

Many pre-retirees make the mistake of helping adult children financially through second mortgages, sacrificing their own retirement security. Protect your financial future first—you may need these resources for your own long-term care.

 

Guiding principle: Enter retirement debt-free whenever possible.