Many people dream of paying off their mortgage to have more funds available in their budget each month. When preparing for retirement, paying off your mortgage can allow you to live more comfortably and have financial freedom. If you want to pay off your home before retirement, there are a few necessary steps to take to ensure that you can truly enjoy the golden years.
Stick to a Budget
Creating a budget is crucial to paying off your home loan and ensuring that you have extra funds available to put toward the mortgage. If you are still saving to buy a home, then saving for a larger down payment could help you repay your mortgage faster. Create a spreadsheet that lists all of your expenses and includes your household income. Use cash to avoid spending more and cut off your usage of credit cards to avoid getting into debt.
Refinance the Home
Refinancing your home can help ensure that your home will be paid off before retirement by requiring less interest each year. Although you’ll have a higher mortgage payment, it can allow you to set a goal on when the house will be paid in full. You can refinance and switch to a 10- to 15-year loan if you currently have a 30-year mortgage, which will allow you to lock in a lower interest rate. Keep in mind that refinancing will require you to pay closing costs each time, making it necessary to have extra funds available to perform the transaction.
Pay Extra on Your Mortgage Payment
Paying more money on your mortgage payment each month will allow you to reduce what you owe without having to refinance. Contact your lender in advance to determine the correct way to pay more money. You’ll also need to read the terms of the loan to ensure that you’re not penalized for paying more than what is owed each month.
Put Excess Funds Toward Your Mortgage
Make it a point to put all of the extra money that comes into your hands toward your home loan to make more progress with repaying the balance. Whether you receive a bonus or extra money on your tax refund, putting the money toward your mortgage will pay off over time. You’ll need to have an emergency fund in place to ensure that you can still cover all of your other expenses throughout the year.
Paying off your home before retiring doesn’t have to be a goal that feels impossible or unrealistic. By practicing discipline, you can retire without having to owe money on your property.
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