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Straight Forward Ways to Pay Off Your House Early and Save for Retirement

indexIf you are like most people, your house is the largest investment you’ll make in your life.  Depending on where you live you could be looking at a $300,000 plus mortgage to pay off before you retire.  Even though interest rates are low, when you calculate interest on top of your purchase price you’ll be paying over $600,00 in principle and interest.

Let’s take a look at some ways you can pay off your home loan early and stash your cash for retirement.

  • It goes without saying you’ll need a plan in order to pay off your home loan early.  Paying if off early will save you tens of thousands if not hundreds of thousands of dollars.   Realizing this can motivate you to put the extra effort into paying your loan down as fast as possible.
  • Perhaps you are like the majority of people and you got a 30 year loan to start out.  You’ve become comfortable with your payments and life has continued.  Perhaps you have a family now, more job responsibilities, etc and you simply don’t think about your loan.  It’s a good idea to check into a 15 year loan.  Sure, you’ll be paying extra per month but with interest rates still low you might be able to afford it and this alone will save you those extra years of paying interest.
  • Have you received a lump of cash recently?  Maybe a year end bonus, a gift from a family member, etc.  Instead of thinking about a new car, dream vacations, etc. – consider putting this extra money towards your mortgage.  You could be taking years off your payments with one lump sum.  Plus, how good will if feel to see the balance keep going down.
  • Increase your monthly payments.   Perhaps you aren’t in a position to refinance to a 15 year loan, but you probably could pay a couple of hundred dollars or more extra per month.  Doing this will allow you to fall back on the lower payments if you had a tight month while still paying down the principle.  Set up automatic payments at the higher amount so you don’t think about it.  This will become second nature and you’ll forget that you are actually paying more than you are supposed to.
  • Finally, consider extra ways to make money.  It seems like everyday we hear about someone starting a small business out of their garage and they turn into millionaires.  While those people are few and far between, it doesn’t mean you couldn’t do something on the side that could make a few hundred dollars per month.  Think about what you enjoy and see if you can turn it into a side income.

Here’s a handy mortgage calculator to help you see estimates on 15 and 30 year loans, as well as an amortization schedule to show you how the interest works.


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