Paying Your home off Faster
In an age where we are taught that leveraging money is the way to go. There are still some of us out there that just want to own our homes outright.
Mortgage rates are at historic lows. If your goal is to pay off your home in the long run this is a great market to look at some fixed rate refinance options. Especially if you are in an adjustable rate loan.
If your main goal is to have no mortgage by the time you retire there are many products that you can look at. There are 10 year, 15 year, 20 year, and 30 year fixed loans.
If you can afford a shorter term fixed loan you will save a TON of interest over the life of your loan. If you can afford a higher payment but want to be safe you can get close to the same amount of interest savings by taking a 30 year fixed and over paying each month. Any money you pay on top of your payment goes directly to principal and drops payments off the back end of your loan.
In most cases if you paid the same monthly payment as you would have on a 15 year fixed loan but had a 30 year fixed loan you would pay your home off about 16 years. This is one extra year of payments if you compare it to the 15 year fixed but that way you always have the flexibility of just making your regular payment if you need some extra money from time to time.
If you can be disciplined and allocate extra money each month you will save thousands in interest payments.
If you have extra money to pay off your house but not quite enough to get into a 15 year fixed this is a great plan to shorten your overall loan.
Just because rates are great does not mean you should run out and get a new loan. If you have been in a fixed loan for more than 5 years you have already paid the majority of your interest on your loan. Refinancing, even at a lower rate will cause you to restart the interest cycle again and extend your loan out another 5 years. The majority of interest in a mortgage in paid in the first 5 years. If you are in an adjustable rate mortgage or an interest only mortgage and can afford a little higher payment, now is the time to strike. Rates are great.
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