Pay Off Mortgage Early Or Invest. Warning! Your Intuition and Financial Truth May Disagree. Key Ideas. Discover 5 ways to accelerate your mortgage payments.
![The 4 Rule And Safe Withdrawal Rates In Retirement (60 Minute Financial Solutions) The 4 Rule And Safe Withdrawal Rates In Retirement (60 Minute Financial Solutions)](http://www.plandirect.co.za/retirement_planning/retirement_pre_product_ra_htm_files/88690.jpg)
Reveals the surprising dangers to paying off your mortgage early. Explains step- by- step how to find the correct answer for your situation. Should I pay off my mortgage early or invest? You will inevitably confront this question in your pursuit of financial security. The problem is the answer is far more complex and confusing than generally understood. The intuitive response is to get out of debt. We all want the security of owning our castle free and clear with one less expense to deal with.
Simple Letter Format of Appointment Sample. This is an simple example of a sample appointment letter. Your company or HR executive can make modifications as per your.
Comprehensive and meticulously documented facts about healthcare. Learn about costs, private insurance, Medicare, Medicaid, politics, and more. Nineteen European Countries Have Negative Rates. 29 August ~ From Switzerland at -0.923% on her 2-year sovereign note, to Germany, Netherlands, Sweden, Denmark. An old rule of thumb warns that shellfish should be avoided during months with no R’s—May, June, July, and August—exactly the season that many of us are heading. Explaining Why The Median 401(k) Retirement Balance By Age Is Dangerously Low. Posted by Financial Samurai 141 Comments. Information and assistance to all businesses wishing to do business with the Department of Veterans Affairs in particular and the Federal Government in general. Get the latest news and analysis in the stock market today, including national and world stock market news, business news, financial news and more. The Hill is a top US political website, read by the White House and more lawmakers than any other site -- vital for policy, politics and election campaigns.
The prospect of making monthly payments for the next 3. However, there are times when intuition and finance disagree. The decision to pay off your mortgage early isn’t just about getting out of debt because complicated equations involving return on investment, time- value of money, and inflation are involved. Remember, this is finance. You can end up with “Alice in Wonderland” scenarios where debt is the cheapest solution, and a dollar paid tomorrow might actually be preferable to debt freedom today. Curiouser and curiouser…In this article, I pull back the curtain exposing the many dimensions to paying off your mortgage early. The objective is to balance your intuition with financial savvy so you can make a smart decision.
Unlike the rest of us, UPS has already begun to plan ahead for the holiday season. On Monday, UPS announced that it’s raising its shipping rates around Black Friday.
The correct answer is not cookie- cutter, but must be custom- fitted to your personal financial situation. Let’s explore how this complicated process works…Get This Article Sent to Your Inbox as a PDF…Send Me This Article! How to Pay Off Your Mortgage Faster. If you decide to pay off your mortgage early, there is no shortage of advice on how to get the job done. Unfortunately, it all boils down to the same three little words – “pay more principal”. There is no magic secret. The only real difference is form, not substance.
Paying mortgage principal early is a powerful money saver because small debt reductions compound dramatically over the life of the loan, thus eliminating many times the payment in interest. For example, this mortgage payment calculator shows you that a 3. If you add just $1. Not bad for an extra $1. If that sounds appealing, then here are the various strategies for early mortgage payoff starting with the simplest and moving toward the most complex…Add Principal to Your Current Monthly Payment: Assuming your mortgage doesn’t have a prepayment penalty (check first), the simplest early payoff strategy is to just add principal to your monthly payment. You could try a one- time lump sum where you put the proceeds from selling a boat, motorhome, or unused jewelry to good use.
Alternatively, you can add a little extra every month by sending your raise or bonus directly to the mortgage company. The concept behind this strategy is you got by just fine without the money before, so you’ll never miss it if you never see it. Biweekly Payment Schedule: Rather than make one mortgage payment per month, try making half the payment every two weeks. Since there are 5. Depending on your situation, this can cut up to 6 years off the life of your 3. Check out the details first because some mortgage holders offer this payment schedule without charge, and others will hit you with a fee. I suggest you try using this bi- weekly mortgage calculator with extra payment capability to test both this early payoff strategy, and the previous one, to see how fast you can be free and clear!
Refinance to a Lower Interest Rate: Another strategy is to refinance to a lower interest rate mortgage while keeping the term (pay off date) the same. The key is to not take any money out or extend the term when you refinance. Your new loan should offer a lower payment due to the reduced interest cost. When you continue making the same payment as before, all the extra will go to principal payoff. The nice thing about this strategy is it doesn’t require any additional money out of your pocket to achieve the desired result (unlike the two previous alternatives).
All the savings comes from reduced interest costs. Refinance to a Shorter Term: Rather than pay over a 3. The monthly payments will be higher, but the interest rate is usually lower, thus offsetting some of the monthly outflow.
Another variation on this theme is to keep your 3. You won’t get the reduced interest rate of a 1. Some people prefer this variation for its increased flexibility and reduced cost, while others prefer the enforced discipline of the required monthly payment. Either way, you can use this mortgage payoff calculator to estimate the monthly payment required to be free and clear for any date you choose. Downsize to a Lower- Cost Home: Changing homes isn’t for everyone, but I would be remiss as your financial coach to exclude this strategy. You could move to a lower cost area or buy a smaller house in the same area.
The smaller mortgage principal means you can be debt free faster using the same monthly payment. The key point to notice about all these early payoff strategies is how they aren’t mutually exclusive. You can combine them in various ways to turbo charge results.
For example, you could downsize your home while financing that less expensive home at a lower interest rate on a biweekly mortgage. Then you could sell that boat and jewelry you never use, putting those lump sums toward the mortgage, while also dedicating this year’s raise to additional monthly principal payments. You’ll be amazed how fast you can get out of debt following this prescription. The only limit to how fast you escape the bondage of mortgage debt is your creativity and dedication to this noble cause.
Pay Off Mortgage Early – The Pros…Now that we know how to pay off your mortgage early, let’s look at the benefits to following this strategy. Save Money: The first and most obvious reason to pay off your mortgage early is it can save you tens of thousands of dollars in interest costs. Peace of Mind: The second reason is peace of mind from owning your own home.
It gives you a warm- fuzzy feeling to know you have a secure place to live, and you won’t be put out on the street at the first temporary setback in employment. Reduced Cost of Living: For most people, mortgage payments are your biggest monthly expense after taxes. Without a mortgage payment, you can save more, work less, or take that dream job you always wanted but couldn’t afford because of the lower salary. Get Rid of PMI: When you accelerate paying down principal, your home equity will reach a threshold where PMI should no longer be required. This saves you money long before the mortgage is paid off, and allows you to accelerate the principal pay- down while still making the same monthly payment. Asset Protection: Many states have laws that protect home equity in the event of lawsuit or other legal proceeding.
Homestead rules can provide substantial home equity protection. Also, retirees sometimes use home equity as an estate planning strategy to protect assets for the surviving spouse should one partner consume all available resources in a prolonged illness or nursing care facility. In short, there are many situations where home equity can represent a more secure asset with special legal privileges when compared to other investments. Retirement Planning: A free and clear home takes on additional significance for near retirees.
If you are entering retirement with a fixed income (Social Security, pension, fixed annuity), then it can be a real benefit to pay off all debt rather than put money in fluctuating investments. This allows you to reduce financial variables and more reliably match forecasted income to expenses.
Additionally, after retiring, that mortgage payment can require pulling money from tax deferred accounts when that money would be better off left to grow. Finally, if your taxable income is reduced in retirement, it can reduce the benefit of the mortgage interest tax deduction, tilting the equation in favor of payoff.
Best Financial Planning Calculators. I’m Todd, and I created Financial Mentor to give you a step- by- step blueprint for building wealth that actually works. More than 1. 5,0. Get Your FREE Wealth Blueprint Here….