High Mortgage Rates Are Holding My Retirement Hostage: Can I Still Downsize and Retire?
We ask retirement wealth advisers what to do.


There’s a reason many people choose to downsize their homes once they retire. Not only can downsizing mean shedding a lot of the work associated with a larger home, but it can also mean slashing your housing expenses significantly. Plus, downsizing allows you to tap your home equity without needing to go out and borrow again.
As of 2022, U.S. homeowners ages 65 and over had a median $250,000 in home equity, according to the Joint Center for Housing Studies of Harvard University. If you’re sitting on a $600,000 home and downsize into a $450,000 home, you may be able to pull out some of that equity along the way.
In fact, there are many people who bank on being able to downsize in order to comfortably move forward with retirement. But while that strategy normally works just fine, today’s housing market conditions are making it more challenging — namely due to elevated mortgage rates.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
As of mid-July 2025, the average 30-year mortgage rate is 6.72%. At this time three years ago, the average 30-year mortgage rate was more than a full percentage point lower. And six years ago, the average 30-year loan rate was nearly three points lower.
If higher mortgage rates are getting in the way of your retirement plans, you’re not alone. But that doesn’t mean downsizing is out of the question.
Run the numbers before assuming that retirement is off the table
The problem with downsizing right now is that if you’re sitting on a mortgage in the 3% range — either because you signed your loan when rates were low or you refinanced a handful of years ago when rates plunged — you may be looking at swapping that loan for nearly a 7% interest rate.
Put another way, a lot of your savings may be lost to a much higher borrowing cost. But that doesn’t mean downsizing won’t make financial sense, says Aaron Cirksena, founder and CEO at MDRN Capital.
“I’ve had clients in this exact situation,” Cirksena explains. “The first thing we do is run the full cost picture — not just mortgage payments, but taxes, insurance, maintenance, HOA fees. Sometimes staying in the current home and making it more retirement-friendly ends up being the more cost-effective option.”
You may, for example, decide to stay where you are for the time being but shed other expenses to make your monthly costs more affordable. That could mean downsizing from a two-car household to a single shared vehicle, or taking steps to reduce other spending.
Otherwise, Cirksena says, downsizing and renting for a while may be an option.
“I know it feels like a step backward, but sometimes renting short-term gives you some breathing room while markets shift around,” he says. “You can invest the equity you’ve unlocked, stay liquid, and keep your options open, which is exactly what this kind of transition should be about.”
Of course, if you have enough equity in your current home and are eyeing a move to an area with significantly lower housing costs, buying your next home in cash may be a viable option.
“I’ve seen people sell high, buy lower in another state, and eliminate the mortgage altogether,” Cirksena says.
If you go this route, though, you’ll need to make sure you’re not tying up too much cash in your next home. You need cash reserves on hand for emergency expenses and to ride out market declines when tapping your portfolio isn’t prudent.
Don't automatically write off a new mortgage either
Cirksena understands why the typical retiree may be hesitant to take out a mortgage today.
“Trading a 3% mortgage for something near 7% feels like shooting yourself in the foot, even if it’s a smaller place,” he says.
But Greg King, senior vice president and wealth adviser at Johnson Financial Group, says higher mortgage rates don’t necessarily need to scare you off if the numbers work overall.
“I wouldn’t be afraid to explore a 30-year mortgage even though that might end in your 90s and rates being at 20-year highs,” he says. If you’re buying a significantly less expensive home, you might still end up with considerably lower monthly payments.
Additionally, your peripheral costs, such as property taxes, insurance, and maintenance, may decline sufficiently that it’s worth considering downsizing, even if the mortgage-related savings are relatively minimal. And if you’re moving to a smaller home in an area that’s cheaper overall, you may find that you’re able to save money on non-housing expenses as well.
However, if you’re going to take out a new mortgage, King cautions that you have to go into it assuming rates will stay the same for the rest of your retirement — or at least not change for the better.
“You need to be more defensive in retirement and assume that rate never changes, bonus if it does,” he says.
Read More
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Maurie Backman is a freelance contributor to Kiplinger. She has over a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. She has written for USA Today, U.S. News & World Report, and Bankrate. She studied creative writing and finance at Binghamton University and merged the two disciplines to help empower consumers to make smart financial planning decisions.
-
New Trump Tax Bill: Five Changes Homeowners Need to Know Now
Tax Changes Trump’s new tax legislation is reshaping how tax breaks for homeowners work.
-
The Smart Way to Retire: 13 Habits to Steal From the Wealthy
Check out these practical strategies that anyone can adopt, not just the rich, and get closer to achieving your retirement dreams.
-
The Smart Way to Retire: 13 Habits to Steal From the Wealthy
Check out these practical strategies that anyone can adopt, not just the rich, and get closer to achieving your retirement dreams.
-
Snowbirds — Want to Ship Your Car to Another State? Beware These Three Scams
Snowbird season is still a couple of months away, but if you plan to ship your car down south or across the country, here's how to avoid three common scams.
-
I'm a Financial Planning Pro: Do Your Family a Final Favor and Write Them a Love Letter
Specify your preferences in this personal document that shares your wishes on how you want to be remembered and celebrated. Your family will thank you for easing an emotional time.
-
The Future of Financial Advice Is Human: Gen Z Trusts Advisers, But AI Skills Matter
Graduates entering the workforce trust human advisers more than AI tools with their financial planning. But AI can still enhance the client/adviser relationship.
-
DOGE Compromised Social Security Data, Says Whistleblower
The whistleblower accused the DOGE officials of copying over 300 million Social Security numbers.
-
I'm a Wealth Adviser: If You're a DIY Investor, Don't Make These Five Mistakes
Even though you may feel confident because of easy access to investing information, you may be making mistakes that could compromise your long-term performance. Here's what you should know.
-
Gen X? Challenges Lie Ahead as Retirement Nears
Tapping home equity and working longer are key strategies that can help overcome a savings shortfall.
-
I'm a Financial Pro: Why You Shouldn't Put All Your Eggs in the Company Stock Basket
Limit exposure to your employer's stock, sell it periodically and maintain portfolio diversification to protect your wealth from unexpected events.