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Relying upon your home equity for retirement requires that you sell the place at some point, cashing out and moving to someplace cheaper (and potentially less desirable) to live, when you stop working. That said, there are a few suggestions you can use to begin planning for retirement. Pay your mortgage off early. There are two levers you can pull to supercharge your retirement plan: (1) you can boost the income you'll have to save and live on or (2) you can slash your future living expenses. The largest of these living expenses is, of course, your mortgage. For my grandmother's generation, the norm was to pay off your 30-year mortgage right about the same time you were winding down a 30-year career. But today, it's much more common for people to retire with 5, 10, 15 years or more still left on their mortgages. One way to get to retirement sooner? Pay your mortgage off early. Enter three different time frames in which you'd like to pay your home loan off (i.e., in 7, 9 and 11 years from now) and enter that time period and the current balance you still owe on your mortgage (loan amount) into our mortgage terms calculator to figure out how much you'd have to pay every month to meet any of these targets. If you can't swing making a higher payment for one of your ideal payoff time frames, try this: simply round your monthly payment up to the nearest hundred or thousand dollars every month, if you can afford it. You'd be surprised at how even small, extra payments can snowball into an early mortgage payoff. Here's another option: pay 1/2 of your monthly every two weeks - because there are 52 weeks in the year, paying on that schedule results in making 26 half, and 13 full payments each year. The extra payment can pay off a 30 year loan as much as 4 or 5 years early! (Note: you can get the same result by simply paying an extra 1/12th of your mortgage payment every month.) However you do it, make sure you tell your mortgage servicer to dedicate any overage you pay toward your principal balance. Tune up your mortgage. If you've been in your home a few years, it can be easy to tune out of the whole mortgage scene - especially after five years of mostly bad news. But the news now might be better than you think, as home values are starting to steady and even edge up, and rates are still uber-low. If you have a 6 percent home loan you got 6 years ago, you stand to save thousands and thousands of dollars by refinancing into a 3.6 percent loan (the going rate this week). And that's thousands and thousands you can put into your retirement fund. (Of course, the precise amount that you personally will save from refinancing depends on your current interest rate, your loan amount and the costs you incur refinancing.) |
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