How to Retire Without a Mortgage After Refinancing

Mortgage rates have been on decline for 40 years (from high 18% in 1981) to around 3% today.

Refinance, save interest, and still pay off your mortgage before retirement. How to Retire Without a Mortgage After Refinancing.

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Show Notes:

Full transcript:

SPEAKERS

Anthony Saffer & Alex Okugawa

Alex Okugawa 0:00
If you have refinanced your home in the past few years, and want to have it paid off by retirement, today, we’re going to discuss how you can do that. Stay tuned.

Anthony, mortgage rates have been on the decline for the past 40 years, I think it was in 1981, it reached a high of about 18%, which is absolutely wild to think about, especially given today’s rock bottom rates, around 3%, sometimes lower. Now, today, we’re talking about how you can have your mortgage paid off by retirement, not “if you should have your mortgage paid off by retirement”, you’ve written a separate blog post on that, which we will link into the show notes. Now in order to take advantage of this. There’s a lot of decisions that need to be made.

Anthony Saffer 0:49
So here’s the scenario is someone buys a home when they’re in say their 30’s. They have refinanced their mortgage a few times, they do so at 50 years old and now they they re-amortize to a new 30 year payment. So now we’re not going to have our mortgage paid off by retirement at 65. Now, we’re scheduled to be paid off at 80. So how do we get there and stay on track?

Alex Okugawa 1:14
So let’s talk about three methods that you can have your mortgage paid off by retirement. First one, which is Continue to pay the same monthly payment.

Anthony Saffer 1:24
When you refinance and you’re saving money every month, it’s actually two functions of a component. You have your interest savings, which saves you money. But you also have that re-amortization, so it stretches things out.

Alex Okugawa 1:37
When you say re-amortization, it basically means another brand new 30 year or 20 years mortgage.

Anthony Saffer 1:43
Stretching it all out. So what you want to consider is let’s make the same payment we’ve been making. It’s not about saving money every month, it’s about how much faster can I get that loan paid off based on the interest.

Alex Okugawa 1:57
I really like this solution, because one, it helps avoid lifestyle creep. A lot of people they like refinancing because they see that lower monthly payment, and they automatically assume oh, that means I can spend more. So just keeping the monthly payment, the same is usually a great choice for people. The second thing people can look at doing is reducing the mortgage length itself.

Anthony Saffer 2:19
30 years is common, we also hear about 15 years, you can do a 20 year loan. And in some cases, I’ve heard of lenders that will do more of like a customized, you know, yearly schedule. In other words, you could say, well, I have 26 years left on my current mortgage. If I’m refinancing, I want to get a 26 year mortgage. And that’s a good discipline way to stay on track.

Alex Okugawa 2:38
So you can kind of match up the mortgage terms that you’re considering with your upcoming retirement.

Anthony Saffer 2:46
Often it falls into place like you have 22 years left on your 30 year mortgage, and you’re refinancing. I’m saving enough interest to basically go down to a 20 year mortgage in a lot of cases, not only am I getting it paid off faster, but my payments are lower.

Alex Okugawa 3:00
Now let’s talk about the third option. This one requires quite a bit of discipline, but makes sense for a lot of folks, which is planning for a lump sum knockout payment in the future.

Anthony Saffer 3:11
Some people don’t want to make that extra principal payment, they’d rather instead of letting the loan company keep their money, they’d rather keep it liquid. So in this case, what you’re doing is you’re making the scheduled mortgage payment, but that extra amount that you want to use to get the principal paid off faster. You basically put it in a sidecar savings or investment, keep it earmarked. And then at some point in the future years down the road, you have this big lump sum of money that you can pay off the balance and be done with it.

Alex Okugawa 3:36
Yeah, absolutely. And the bottom line is people want to take advantage of today’s low interest rates, but also want to make sure that they have that mortgage paid off by retirement. And this is the kind of stuff that we help folks with. To make sure that make a wise decision, not just looking at the dollars and cents of how much they can save in a refinance, but to make sure they’re accomplishing their goals of, maybe having that mortgage paid off by retirement. Folks can always visit our website or give us a call if they’d like to learn more.

This does not constitute an investment recommendation. Investing involves risk. Past performance is no guarantee of future results. Consult your financial advisor for what is appropriate for you. See our website at onedegreeadvisors.com for full disclosures.

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