There’s nothing better than entering retirement with no debt. It gives you a freedom and a certain peace of mind that you really need, especially during this period of your life. Unfortunately, many individuals don’t get to enjoy this feeling. All over the United States, numerous seniors go into retirement while still having to make payments on their 30-year mortgage.
We’d like to think that retirement is a time of low expenses and low stress related to financial matters. But, when you have to pay your mortgage, and when there’s no longer a regular salary coming in each month, it becomes a bit more challenging to refinance your mortgage. But not impossible.
Here are some tips that may come in handy when contemplating your mortgage as you enter retirement.
Choosing a shorter-term mortgage
Thanks to today’s low interest rates, you can refinance to a shorter loan structure for the remaining term of your mortgage. This way, you’ll be able to pay off your mortgage faster. And don’t forget that shorter-term mortgages usually carry lower interest rates. This can help you keep your monthly payment close to its current amount, although you pay off the loan faster.
Making additional payments
Most mortgages allow prepayment, but you should check this, just to be sure. Making additional payments is good for two reasons:
- It helps you reduce your principal balance;
- You pay less interest on the loan balance.
This way, you can really shorten the life of your mortgage loan.
You can re-cast your loan
People re-cast their loans when they want to make a large, one-time prepayment. By re-casting a loan you can re-amortize the remaining balance over the original life of the mortgage. It may not help you pay off your loan earlier, but it will reduce payments. And this way your mortgage will be much more affordable.
Don’t rush to lower your rate
A lot of people refinance just to lower their monthly rates. And although this takes some pressure off of your monthly spending, it won’t help you save money, not in the long run. You’re just making smaller payments, over a longer period of time. And there’s also interest you need to think about.
Entering retirement with a mortgage doesn’t have to worry you. Rest assured, many people are in this exact situation. If you are responsible, smart and if you follow our tips, you can get rid of that mortgage in no time and you can then enjoy the peaceful and quiet retirement that you deserve.