Mortgage Payoff Attracts Heated Debate

But as clients near retirement and want to pay off their mortgage, he suggests taking a big bite at a time if they are able -- say $50,000 out of a $150,000 mortgage.

Some members of the baby boom generation are expected to enter retirement with lots of debt, such as credit card balances and mortgages, due in part to the extremely low interest rates of recent years. Many have refinanced in 30-year loans adding cash-out and have also taken on extra debt through home equity loans.

While this could be a real problem, some financial advisers say there's nothing wrong with having a manageable-sized mortgage in retirement, that the boomer generation will behave differently in retirement than previous generations. Having a mortgage, these advisers say, will allow retirees to continue to itemize their tax deductions, serving as a "gateway" to bigger tax breaks.

Goldberg, however, is not enamored of this approach: "I don't think you should ever go out of your way to find a tax write off, especially with an older person who's in a lower tax bracket."

As mortgage holders near the end of a mortgage term, they are not paying much interest anyway, notes Aznar, and should check to determine if they would be better off relying on the standard deduction rather than itemizing when filing a tax return.

Payments on a 30-year, fixed-rate mortgage go mostly toward principal during the final 10 years. Of course, a homeowner who takes out a 30-year, $250,000 loan at today's rate of 5.42% would pay almost $140,000 more in interest payments over the life of the loan than one who gets a 15-year loan at 4.84%. For a dynamic mortgage calculator that makes figuring out this kind of thing fun, visit www.jeacle.ie/mortgage/.

A 15-year mortgage is ideal for someone with a very secure job and good cash flow. The 30-year loan is a better choice for someone with an uncertain job field but a desire to prepay. Most lenders allow borrowers to prepay at will with no extra charge.

Goldberg, who likes 15-year mortgages for those who can afford it, loves that he was recently able to refinance his mortgage with a 10-year note that will pay off as his children start college.

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