The most common term for a homeowner’s mortgage is 30 years. This is because it offers the lowest monthly payment of any term. However if you are planning for retirement around 65, your 30 year mortgage may overlap. If you do not want to make payments on your home when you retire you would have to get into a 30 year mortgage by 35 years of age. This is not the only option though, you can refinance into a lower term.
20 Year Mortgage for First Time Home Buyers
Getting into a mortgage by 35 could be a problem for many because of strict lending requirements. Also with a shaky real estate market, the investment scares many first time home buyers. The option of buying later is always available, but first time home buyers may have a hard time qualifying for a 20 year mortgage. The best mortgage term available for a first time home buyer is often the 30 year mortgage. So getting into a 30 year mortgage later on in life still leaves the option of refinancing to a shorter term.
Refinancing by 45 Years Old
If you are planning on retiring at 65 and want to be mortgage free, you could refinance with a 20 year mortgage at 45 years old. Even if your 30 year mortgage has only been paid off for 5 years, a refinance to a shorter term is possible. By using a 20 year mortgage to refinance you can cut time off your term, preparing for retirement. Also, you will only have a slightly higher monthly payment because the interest will be less.
Although a 30 year mortgage is a great loan for someone who has never bought a house, refinancing is inevitable if you want to save money. With such a long term the bank is charging more interest. Refinancing your home will utilize your newly gained credit, which means you will receive a better rate. Also, if mortgage rates are at an all time low when you refinance, you will save money on your loan. The 10 year and 15 year option can be viable solutions for a refinance but they have higher qualifications to meet. A 20 year mortgage can easily be obtained in a refinance if you have been paying your mortgage payments on time.
Planning for retirement is important when it comes to paying your mortgage. If you have a monthly home payment to make, retiring may cause you to default. Looking into the option of refinancing at a lower rate is your best bet of saving money and paying your home off on time for retirement. After all, if you save money in the long run on your home, you will have more money for retirement. As always, a mortgage banker will offer you the best information about terms and refinancing. They can also notify you of government assisted programs which could be a better option for retiring by 65.
