You Asked, We Answered . . .

Q: Is it a good idea to pay off your mortgage when you become a widow?

A: Only someone who knows all the particulars of your financial situation can offer a truly informed answer.  Ask yourself what interest rate you are paying on your mortgage, what your tax bracket is, and what losing the mortgage-interest deduction would do to your tax bill next year.

          You should also look at how much credit-card debt you are carrying. If you are carrying balances on high-interest credit cards, you should pay those off first, because the interest you are paying on your mortgage is most likely considerably less, and you’ll save yourself a lot of money by getting rid of the high-interest credit-card debt.

          However, in general, the answer is yes. Paying off your mortgage would give you an unencumbered asset that you can always tap into with an equity line of credit if you absolutely need it.

          In part, your decision should be based on how paying off your mortgage would make you feel.  As financial planner, Elizabeth Lewin, who writes MAKING BREAD’s “Female Finance” column, responds: "Sometimes it is nice to be mortgage-free. You can pay off the mortgage and then take out a home equity line of credit to use if you have to, when the house needs a new roof, or some other major expense comes up.” Her advice:  “I would pay off one with a high interest rate, but one with a low interest rate you might want to keep since the interest you pay is a tax deduction.”
 

Best of luck to you!

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This answer was prepared by the staff of MAKING BREAD. Click here to try a trial subscription to MAKING BREAD magazine for only $5.95, and catch up with all of the terrific “Female Finance” advice offered in every issue, downloadable immediately from our Download Center.
 

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