A debt-free retirement is an ideal financial goal. Most people, however, don’t believe this is achievable because of mortgage payments. Mortgages can span multiple decades, which means you may have several more years to pay off a housing loan after retirement.
Fortunately, you can follow a few strategies now to achieve a debt-free retirement. Consider the following options.
Reduce principal balance by making advance payments
Some mortgages allow advance payment of principal balances. This strategy can shorten the duration of your mortgage loan, which should move you closer to financial freedom. Your advance payments can also reduce interest. Pay off your loan early, and you can retire comfortably. How do you do it?
Before you retire, make additional payments to reduce your principal balance. But get confirmation that your lender and your terms allow unscheduled payments.
Recast your loan
When you recast your mortgage loan, you can reduce payments. Recasting re-amortizes the loan. The term stays the same, but you can reduce the principal amount and make lower monthly payments.
Recasting a mortgage requires you to be current on monthly payments. While it generally works for fixed-rate loans, it may apply to adjustable-rate loans, too. Check with your lender first, and ask about recasting cost.
Refinance to shorten the loan term
Refinancing, much like advance payments, can save you money on interest payments. This option can help you get a manageable interest term and rate. When you refinance, you can also get money, which you can use to increase equity on your property. You can upgrade certain features or renovate a room to make it more comfortable. Increasing equity on your home adds value to the property, allowing you to resell at a profit for a better retirement.
A debt-free retirement is probable. With careful evaluation of every option, you can enjoy life after employment without worrying about a mortgage.