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Top 2 Ways to Retire Without a Mortgage

Part of the home buying process is being able to finance a home. The majority of homebuyers do not have the money to pay for a home up front and will therefore take out a loan. Owning a home will always have some expense. Whether you are having to pay the utilities or the property taxes or the insurance, there is going to be a bill that will have to be paid. For most people, the mortgage monthly payment is the largest bill. But when it comes time to retire, there are ways to have your largest bill paid off, allowing you to have more flexibility and freedom in retirement!

The top two considerations when trying to determine how you can best pay off your mortgage are: how much you still have left on your mortgage and the length of time you plan on living in that particular home.

The top two methods of paying off your mortgage before retirement is through refinancing and extra payments. Both or either of these options is not the best option for all people.

Refinancing is best for those who have already been paying their mortgage for many years and still have many years to go. Refinancing a loan to make it a short-term loan of 10 or less years will speed up the process. Generally, if you refinance, there are some extra fees that come with- the transaction and closing costs. That is why if you only have a few years left on the mortgage, refinancing is probably not your best option. Also, when you begin paying off a mortgage, you are mostly paying the interest and not the principle. If you refinance too early, your monthly payment could increase drastically causing it to be difficult to keep up with the payments.

Extra payments are best for those who need some flexibility in their payments. Unlike refinancing a loan, where the payment plan is fixed, making extra payments gives you the ability to pay extra when you have the extra to spend. The extra payments can be made every month, bi-annually, yearly, or however frequent you desire. It will help you pay off your mortgage faster and will decrease the amount you will have to pay in interest over the years.

Before choosing to refinance or make extra payments, seek financial advice. As you look towards retirement, there are many areas your money can be geared towards. Make sure you are setting yourself up for the best retirement possible!

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