Mortgage Payoff Calculator

Compare the loan rate with what your safe money earns, then weigh the rest. If your mortgage charges more than your bond funds, CDs and Treasury bills pay, prepaying it is the best risk-free return you have. If it charges less, the money is worth more where it is, and keeping the loan is a reasonable choice as long as the payment fits comfortably in your retirement budget.

The comparison that matters in your late fifties and sixties is not the loan against the stock market. It is the loan against the conservative part of your portfolio, because that is the money you would actually use to pay it off. Few people sell equities to clear a mortgage. They use cash, a maturing CD, bonds, or the last few years of salary. A 6.5% mortgage beats a 4% bond fund comfortably. A 3% mortgage loses to the same fund.

Then come the questions the calculator cannot answer for you. Will you stay in the house for the next ten years, or sell and move closer to children? Would you sleep better with no payment at all? Would paying it off leave you with too little cash? Most of the decision rests on those answers, and the numbers below help you see what each one costs.

Because it is paid from withdrawals, and withdrawals from pre-tax accounts are taxed before you can spend them. While you work, the payment comes out of salary. In retirement, a $1,471 monthly payment ($17,652 a year) funded from a traditional IRA takes a gross withdrawal of about $22,630 if the last dollars are taxed at 22% federally, before any state tax. Remove the payment and you remove that withdrawal.

A smaller withdrawal has effects beyond the payment itself. It lowers your taxable income, which can keep more of your Social Security benefit untaxed, keep you in a lower bracket when required minimum distributions begin (at 73, or 75 if born in 1960 or later), and leave more room for Roth conversions in the low-income years before RMDs. Our guide to Roth conversions before RMDs explains why that room is valuable.

It also changes how exposed you are to a bad market early in retirement. A fixed payment has to be met every month whatever stocks are doing. If the first two years of retirement bring a 25% decline, a household with a mortgage has to sell more shares at low prices to keep up. A household without one can trim travel and wait. That is sequence-of-returns risk, and a lower fixed bill is one of the simplest defenses against it. The Retirement Withdrawal Calculator shows how much a lower spending need improves the odds.

For most retirees, no. The deduction only helps if your itemized deductions exceed the standard deduction, and the standard deduction is large and larger still after 65. In 2026, a married couple filing jointly with both spouses 65 or older has a standard deduction of $35,500: $32,200 plus $1,650 for each spouse (IRS, 2026). Through 2028 there is also a separate senior deduction of up to $6,000 per person, which you get whether or not you itemize and which phases out at higher incomes.

A $180,000 loan at 5.5% generates roughly $9,700 of interest in its first year, and less every year after. Unless your state income tax, property tax and charitable gifts already bring you close to the standard deduction, that interest does not reduce your tax at all. Leave the calculator's "I itemize and deduct mortgage interest" box unchecked unless you know you itemize. When it is unchecked, the break-even return is simply your loan rate.

From the least-taxed source you can spare, in roughly this order:

1. Salary in your last working years. Extra monthly payments from wages carry no withdrawal tax and are the easiest way to aim for a payoff date that matches your retirement date.
2. Cash above your reserve. Savings, money market funds or a maturing CD beyond the one to two years of spending you keep on hand.
3. Taxable brokerage accounts. Only the gain is taxed, often at 0% or 15% long-term capital gains rates. Sell high-basis lots first.
4. Traditional IRA or 401(k), spread over years. Every dollar is ordinary income. If you use these accounts, take the money over several tax years so it fills your current bracket rather than jumping to the next one.
5. Roth accounts last. Roth money grows tax-free and has no required distributions for the owner, which makes it the most valuable money you have to leave in place.

Watch the Medicare effect of a large withdrawal. Part B and Part D premiums include an income-related surcharge (IRMAA) based on the tax return from two years earlier (SSA). For 2026 the surcharges begin above $109,000 of income for a single filer and $218,000 for a joint return, and the standard Part B premium is $202.90 a month (CMS, 2026). A one-time $150,000 IRA withdrawal at 63 can raise both spouses' premiums at 65. Our Medicare and IRMAA guide and withdrawal order guide cover the rules in detail.

Keep it, and keep the cash that would have paid it off somewhere safe that earns more. Many homeowners refinanced in 2020 and 2021 at rates near 3%. Take $150,000 at 3% with 14 years left, a payment of about $1,095 a month. Sending $800 a month extra retires it in 7 years 5 months and saves about $16,500 of interest. But investing the same $800 at 5% ends 14 years about $15,500 ahead, and at 4% about $7,200 ahead. When safe yields exceed the loan rate, prepaying gives up return for no added safety.

There is a middle path if the payment bothers you. Set aside the payoff amount in Treasury bills or a CD ladder, earmarked for the mortgage. You keep the spread between the two rates, you can write a check to clear the loan whenever you like, and the money stays available for a medical bill or a new roof. Many retirees find that knowing they could pay it off gives them most of the comfort of having done it.

Home equity is real wealth, but it is not spendable money. You cannot pay a surgeon or a contractor with it without selling the house or borrowing against it. That is the strongest argument against pouring every spare dollar into a mortgage: a paid-off house with thin savings is less secure than a small mortgage with a deep cash reserve. Before prepaying, size your reserve with the Emergency Fund Calculator.

If you expect to sell within a few years, the case for prepaying weakens further. The sale will retire the loan anyway, and up to $250,000 of gain ($500,000 for a married couple filing jointly) is excluded from tax if you owned and lived in the home for at least two of the five years before the sale (IRS Topic 701). Our downsizing guide works through the numbers.

If you plan to stay and may one day use the house for income, note that a federally insured reverse mortgage (HECM) requires you to be 62 or older and to pay off any existing mortgage when the reverse mortgage closes, either with your own money or with the loan proceeds, after counseling from a HUD-approved agency (CFPB). A small remaining balance leaves more of the reverse mortgage available to you.

1. Enter the loan as it stands today. Use the principal balance from your latest statement, the rate, and the years left. The estimated payment should match the principal and interest on your statement.
2. Set a payoff date. Adjust the extra monthly payment and any lump sum until the accelerated plan ends by your retirement date.
3. Use a realistic return. In the comparison, enter what your bond and cash holdings earn, not what stocks have earned historically. The break-even figure tells you the return your investments must beat.
4. Check the sensitivity table. If paying off wins at 4% and 5% and loses only at 7% and above, the payoff is the safer choice for money you would otherwise hold in bonds.
5. Decide what you will pay it from. Salary and cash first, IRA money spread over years, and a cash reserve kept intact.

The figures cover principal and interest only; property tax, insurance and any HOA dues continue after the loan is gone. For a worked case with a mortgage in the picture, see Can We Retire at 60?