SIX WAYS TO RETIRE WITHOUT A MORTGAGE:
Kiplinger wrote an article today about ways to retire without a mortgage and I pretty much agree and so I am going to share with you what my Grandfather, Opa layed out for us when I was a youngster:
Never have a mortgage longer then 7 years.
Opa believe in reinvesting in real estate and one couldn't save when one was paying so much interest on a mortgage.
Pay Your Taxes, Pay Yourself and Pay God:
Opa was a strong believer that if at the end of the pay check there wasn't any money, then you didn't charge but you saved. Actually, when one did charge, it wasn't a revolving charge back then but at the end of the month. So, Opa's philosophy was if you can't pay for it in cash, then you don't need it.
Buy what you need:
Have you ever gone into the grocery store without a list and come out with ten more items the the one item you needed? My Dad has a list every week that he gives my sister, Debbie, when they hit Meijers in Grand Rapids, Michigan. He now understands that it is wise to buy when on sale and have a personal inventory as that will save you money on your required monthly expenses.
The above is the foundation. Now, let's look at a stronger way to retire without a mortgage ....
- Make Extra Mortgage Payments: - when you make extra payments during the course of the calendar year on your mortgage, you are reducing the principal faster. For instance, Opa and my Dad had/have always said to us that when we made two extra payments on a 30 year mortgage, it reduces the mortgage down to roughly a 19 year mortgage.
- Refinance: Totally agree with this one as I have a lot of friends who have asked if they should/could refinance their home for a lower interest payment. This is so ideal as most of my friends have been in the 6.5 to 7.25 interest rate on a 30 year mortgage but had 25 years left on their mortgage. So, the idea isn't to refinance and reduce your monthly payment vs reduce the amount of interest you are paying to the Bank!! You pay less interest and you put the money back into your pocket.
- Downsize your Home: The above home was a 1.5 story home but it had 8' outside walls on it so there was plenty of room when I redesigned this home. However, as we get older, let's get serious and rethink space: When you are an empty nester, do you require as much space as you did when you were raising your children?
Here is a photo of the garage to the redesigned home but my point is, if you can't refinance your home but have equity, then another route to go is to downsizing. That way, you have a smaller mortgage payment, less real estate taxes (those are monstrous in Chicago) and less stress on the monthly commitment.
- Move to A Cheaper City: I have several retirees that are seriously considering moving away from Chicago because of the monthly real estate taxes. One of my friends/clients is paying $750 a month in real estate taxes! On a fixed income, that is a "bite in the britches" and not smart thinking. Moving to a cheaper City, while not ideal, is an option.
- Get a Roommate! With the cost of maintaining a home, plus the costs to fuel the home let alone the real estate taxes, another great option is to rent a room or get a roommate. Set the boundaries, the rules and do your research but another great way, especially, if this is a parent who is living alone but needs some monitoring if the children of the parent are not in the immediate area.
- Rent vs Own: Easy, easy but what happens if you run out of money? When one owns a home, they have options, including a reverse mortgage.
Bottom is we need to consider what it is going to take to maintain our lives when we retire. The less baggage, such as a mortgage and credit cards, the better our retirement life. I believe Opa was right with his rules:: Live within your means and not your credit card.
Opa also said: "Save, like there is no tomorrow."
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