Retiring in 2026? 4 Ways To Get Out From Under a Mortgage
Written by
Vance Cariaga
Edited by
Jenna Klaverweiden
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If part of the American dream is to own a home, then another part of that dream is being free and clear of mortgage payments by retirement.
Carrying a mortgage into retirement creates added financial stress because you no longer have a steady paycheck to pay it down. In contrast, paying off a mortgage means you have “one fewer worry” in retirement, according to Charles Schwab.
For those who are retiring in 2026, here are four ways to get out from under a mortgage.
Sell Your House
The quickest way to get rid of a mortgage is to sell your house and downsize into something less expensive. This is an especially good option if the sale provides a big cash infusion.
“If things really go your way, you may even be able to use the proceeds from selling your old home to pay cash for a smaller place and get rid of your mortgage altogether,” per Global Credit Union.
Just be sure to research the potential tax implications, including the possibility of capital gains taxes.
Sell Other Assets
Selling other assets, like stocks, can help you raise cash to pay off the mortgage. This could be very expensive from a tax standpoint, however.
If you sell an asset you’ve held for less than a year, you’ll face a short-term capital gains tax that can take a big chunk out of your profits. You might also face a big tax bill if you sell a second home that you rent out and haven’t lived in regularly over the past several years.
Tap Into Savings
You could also use your savings to pay the mortgage off, but you have to be careful.
Draining your retirement savings just to pay off a mortgage could lead to years of financial stress. As Schwab noted, you don’t want to “end up house rich and cash poor” by paying off your home loan at the expense of your savings.
There are also tax considerations to keep in mind — especially if you’re retiring at a comparatively young age. For example, taking money out of your 401(k) before age 59 1/2 usually triggers a 10% penalty on top of ordinary income taxes. This penalty applies “no matter the intended purpose, even for a mortgage,” according to Principal Financial Group.
Put Extra Money Into Your Mortgage Payments
This option works only if you’re either close to paying off your mortgage or have a lot of extra money to pay the mortgage down.
Paying an additional $200 or so above your mortgage bill won’t do much good if you want to retire in 2026 but still owe tens of thousands of dollars. But if you’re close to paying off the mortgage — or can afford to add a few thousand dollars a month to your payment — it’s a viable option.
A similar option is to make two payments a month rather than one, which effectively doubles the amount you pay. But you’ll want to make sure your lender allows this option, because not everyone does.
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