Every homeowner knows that dealing with monthly mortgage payments can become worrisome, even a burden, and yet, more people refinance their mortgages every year, extending loan payments, decreasing their payments and dragging things on ad infinitum, without realizing that if they cut back a little here and there, a mortgage could very well be paid off early, leaving you debt free in years rather than decades. Some people, mostly senior citizens, resort to reverse mortgage options.
A reverse mortgage allows homeowners to use their equity for a variety of reasons, but that loan does not have to be repaid until the owner dies, sells the house or moves away. However, in the United States, a reverse mortgage is offered only on a first mortgage. Typically, such an option is not advised. Did you realize that by making an extra payment every year, you could save five to six years of mortgage payments? Sure, you get to write off your mortgage interest on your taxes, but that saves you only a few thousand dollars a year. So you get to write off pennies to the dollar at income tax time. Why not go all the way and save thousands every month?
Paying off your mortgage early will help you out in your quest to be debt free. How many people do you know that are debt free? One, a handy? None? Being mortgage free allows you to use your hard earned money for more than making interest payments that do little to knock down the principal you own on your first, or even second mortgage. Refinancing helps when you get in a bind, but should not be used for budget control.
In addition, paying off a mortgage, even a reverse mortgage early will allow you to concentrate on other important matters, like retirement. How many of us long to retire and travel, to do the things we did not have the time to do when we were working all the time, because we had mortgages, car payments, college tuition fees and a myriad of other debts, responsibilities and bills looming over our heads.
While investing in the stock market helps a lot of people the funds to save for retirement, just as many lose money when interest rates fall, the market takes a hit or when global events cause investors to pull out. Investing in the stock market never guarantees success.
Without a mortgage or huge reverse mortgage payment, the thought of retiring may not seem so uncertain. Not having to worry about where that money is going to come from enables you to save for health care, travel, or just lounging around. Many people buy and sell every few years to try to turn a quick profit, but they never get out from under the burden of paying a mortgage.
By cutting back on frivolous spending, homeowners can save thousands of dollars a year, dollars that can go towards paying down the principal due on a mortgage. Remember, that every dollar over your minimum mortgage payment goes toward paying off principal, so it really pays to pay extra! Instead of buying that hot tub, put the money towards an extra house payment or two. Instead of buying that new car because it looks cool, use the money to pay down the balance on your principal.
Planning a strategy to pay off your reverse mortgage, or any mortgage, early takes some forethought. Of course, you need to take into consideration your current interest rate, your tax burden and of course, your overall financial situation.
Can you pay off a mortgage in less than five years? Depends on what kind of deal you got on the house when you bought it. It also depends on how much of a down payment you put on the house when you bought it. There are certain things that potential homeowners can do to ensure that they'll be able to do just that. It just takes some research, a lot of determination, and a bit of belt tightening.