In previous articles, I have written a lot about buying a home or an investment property. Well, if you are fortunate enough to have a home and/or an investment property, or when you do have one in the future, you need to think about the mortgage and its long term effects.
The most common loan today is a 30-year fixed rate mortgage. However, many of us do not think about the long term effects of it, but it is important to do so. The ultimate goal when you are planning for your retirement and when you are looking at a healthy financial portfolio and future, is to pay off your mortgage or mortgages. Below are some ideas for you to consider to achieve this goal and to help you plan for your future.
Get a shorter term loan – When you think of a home mortgage, most people think about a 30-year fixed rate home loan. However, there are shorter term loans that are available to you, like a 15-year mortgage. The big advantage of having a shorter term loan is that you pay off your mortgage faster. The disadvantage is that you will typically have a higher mortgage payment.
Pay down your loan principal – You can also pay more than the minimum amount required each month on your mortgage to pay down the principal faster. For example, if your mortgage payment is $2,000 a month and you pay $2,200 a month, the additional $200 a month will go directly to pay down the principal amount and will not go to pay for interest.
Start a savings account – Another way to pay off your mortgage is to simply start a separate savings account. You can start with an initial small deposit and then slowly build it up. You can think of it as a bill that you have each month and pay an amount that you can afford. You will be amazed how quickly the account can grow through time.
Refinance – Today’s mortgage interest rates are so low, you owe it to yourself to look into refinancing. I just had some clients refinance their home here in San Diego and they got a new 30-year home loan at a 3.38 percent fixed rate, which is an amazingly good mortgage interest rate. It would benefit you greatly if you can refinance at a lesser interest rate than what you currently have now, which means your monthly payment will be less.
As a general rule, the key to financial health is to not pull more money out when you refinance. By doing this you will increase the balance of your loan and it will be harder and harder to ever pay off your mortgage.
It is fascinating when you take the time to analyze a typical home mortgage. If you look at a 30-year fixed rate mortgage that is paid to the full term of the loan, you can easily pay back to the lender two to three times the original amount of money that you borrowed.
No matter what your age is, you should plan for your future and for your retirement. A big part of this planning is to look at your mortgage options and try to pay off your mortgage or mortgages as smartly and quickly as possible.
Until we meet again, enjoy your home life!
Trent St. Louis is a licensed Real Estate Agent and a member of the National, California and San Diego Associations of Realtors. You can reach Trent at The Metropolitan Group at 619-300-1621 or at SpecialAgentTrent@gmail.com CADRE#01273643.
