Retirement means you have all the time in the world to relax and think of everything that you have accomplished in your life. It also means that you have to live on a tighter budget since you will no longer be getting regular paychecks. One of the best ways to ensure that you stay financially stable in retirement is to pay off your mortgage before the day comes.
Depending on the loan terms of your home loan, the balance, and your new budget, there are different ways to pay off your loan. There are two main ways to pay off your loan before retirement, which are:
- Refinance. If your home was a 30-year fixed rate loan that you have already been paying off for 20 years, you may want to consider refinancing. It is important to keep in mind that this may not always be the best choice, since the closing costs of a refinance are typically around 3 percent of the loan amount. If you are near the end of your loan, it may be a better decision to put those extra costs to extra payments to pay off the original loan.
- Prepay your loan. When you refinance your loan, you are locked into many more years of a payment plan. If you have the financial flexibility to make extra payments or pay a little more each month, it may be a better choice. You also may want to consider paying back a lump sum if you get a bonus at work or use your tax refund.
For more advice on how to repay your home loan before retirement, contact Andraya Coulter in Pleasanton, California. As a mortgage expert, I can work with you to help you decide what your best route is to repay your home mortgage before your retirement.