Baby boomers are retiring in droves. The median age of U.S. population has climbed higher for four years since 1999 and will climb higher again by 2030.

According to Freddie Mac, more Americans are paying down their mortgages. Fifty percent of 2010 third quarter refinancing resulted in smaller mortgages than before.

Why it is happening now? There are several reasons for the surge in smaller mortgages. First, in order to qualify for a lower mortgage interest rate, you need to have minimum of 20% down payment or loan to value. In order to achieve this, people put in more money and thereby reducing the mortgage. Second, look at what you can earn if you put the money into a savings oriented instrument. 30-Year Treasuries pay 3.2%. If you use the money to pay down the mortgage and refinance the balance at 4.0 – 4.5% interest, you are essentially earning more on your money. Third, baby boomers who don’t want to have a huge monthly mortgage payment are paying down the loan balance to increase the equity in their homes. Finally, when they retire and sell their home that will be another source of income during retirement.