For most of us, mortgage payments are the biggest expense we have. And by default, we often use the equity we built up in that home to fund a portion of our retirement. We downsize to a smaller home. Financially independent people, however, consider buying cheaper houses as their building their retirement nest eggs so they have more to put into savings. That may mean a smaller house or, in some cases, moving to a part of the country where housing costs are significantly lower than where they currently live.
If you are going to rely on home equity for a portion of your retirement, you need to factor that into your planning. Housing booms and busts happen over any period of time, so you need to factor them into the possible worst-case scenarios you may have to face after you stop working. And don’t forget to factor in things like maintenance and taxes when you plan your post-work life budget.
In recent years mortgage rates have been so low that some retirees have held a mortgage even after they stopped working to continue having that cash work in the stock market. But the overwhelming consensus on online forums focused on financial independence is to avoid that strategy. There's a psychological boost that comes with entering retirement with no debt. And, beyond that, if a successful early retirement means not worrying about money, trying to time the stock market with mortgage rates seems the antithesis of that goal.