A standard 30 year mortgage loan may not be for you. While 30 year interest rates are in the daily news and most mortgage lenders offer them as the primary solution, it may make it harder for you to reach your financial goals. Why? Thirty years is a long time and if you want to retire in less than three decades, having a mortgage payment may delay your long term plans.
Baby boomers and those wanting to retire in twenty years should carefully evaluate their mortgage loan to determine when exactly it will be paid off. Next, you need to identify what your future financial goals are.
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Consider the Following When Thinking About Your Mortgage
• Will you be paying for your child’s college tuition? If so, when?
• When do you want to retire?
• Are you interested in reducing your work hours once you reach a certain age?
• Do you want to start traveling?
• Have you dreamed of buying a second home, RV, or yacht?
It is difficult to do these things with a mortgage loan weighing you down. For most families their mortgage, housing expense, is the largest single bill they pay on a monthly basis. As long as you have a mortgage payment it can be challenging to find the money for tickets to Rome or paying for that new sailboat, especially if you are retiring on a fixed income.
There’s no need to feel discouraged. Speak with a mortgage banker and create a plan for your mortgage loan to match your financial goals. One way to do this is to refinance to a fifteen year mortgage loan. Your monthly payment will go up now, while you are earning a higher income, then go away completely when you want to retire or reduce your workload. In other words, diligence now can deliver the freedom you have been dreaming of in the future.
Fifteen year mortgage loans also have a lower interest rate than their thirty year counterparts. This, combined with a shorter amortization schedule, will save you thousands in interest over the life of your loan. For example, recently 30 year interest rates were 4.33%. On a 30 year amortization schedule the monthly payment would be $1,489 and the total interest paid would be $236,365. In this scenario, if you refinanced to a fifteen year loan the interest rate would drop to 3.34% with a monthly payment of $2,121 and the total interest paid would be $81,807. By paying an extra $632 a month the loan will be paid off in half the time and this family would save a total of $154,558! That’s enough money to buy a vacation home in Florida, an RV, yacht, or travel the world in style.
Can you afford paying a little more now to achieve financial freedom in the future? If so, contact your mortgage lender today and discuss your refinance options. Working together, you can create a mortgage plan that coincides with your goals. If you can’t afford a fifteen year mortgage payment, a twenty year loan is also an option to consider. You will still pay off your home faster, but with a lower monthly payment.
