Do you need a mortgage button?

Castles in the Sand

The tradition of a mortgage button is a little scrimshaw button mounted atop a stairway’s newel post, as a symbol the mortgage was paid off. This is something I saw for the first time on Nantucket Island where my uncle and his wife retired many years ago. Ever since then, I’ve been fascinated with the concept of a mortgage button. Now, however, paying off your mortgage may not be as impressive as in times gone by for every homeowner.

In today’s world, there are many forms of retirement, or not retiring at all. Because of Zoom, inflation and interest rates, many individuals who would have retired even 10 years ago are postponing retiring. If your choice is to retire, are you planning to pay off your home’s mortgage with other assets or will you keep your mortgage in place? Retiring with your home “free and clear” was a goal of previous generations and many homeowners still strive for this, but financial managers may want to have a further discussion about the real benefits.

Even if you decide to give up work or work part-time, many have calculated that carrying a mortgage is a better choice. This is especially true if you have a low-rate mortgage because of either owning your home only a few years or, like many people, having refinanced your existing mortgage when rates were ultra-low. According to the Federal Reserve, nearly 58% of those ages 65-74 had mortgages or home-equity lines of credit on a primary residence in 2019. This is up 22% from 1989 based on available statistics.

Even if you can afford to pay off your mortgage before retiring, does it make sense to deplete your cash or investments for this use? A financial advisor will look at all of your income and assets and make a recommendation designed specifically for you, including safe, low-risk investments.

In addition, your tax consultant needs to be in the loop since tax ramifications must be considered. Although the 2017 tax overhaul significantly raised the standard deduction, there are still homeowners who will benefit from a home mortgage interest deduction.

Finally, keeping a low-rate mortgage frees up equity that you otherwise would not have access to. After retirement or switching to part-time work, your family income is obviously reduced, which would make it difficult to qualify for a new mort-

gage or home equity loan should you need it for a health emergency or other reason. Or just having the money available for a new car, dream vacation or to help out a family member may be enough of a reason not to pay off your mortgage.

Paying off your mortgage and retiring with no debt certainly gives you peace of mind, and that’s something to be proud of and a reason to get a mortgage button. The mortgage button can also be called a brag button indicating there is no lien on the property. Part of the mortgage button’s myth or fact is also another little-known aspect that the mortgage, when paid off, is stored in the newel post at the base of the home’s stairway before the mortgage button is installed.

Historians have debated the truth about the mortgage button for over a century. As for me, it’s a great story, true or not, and a special memory from my first trip to a magical island. Happy holidays!