For most homeowners retirement is a far away thought and planning for it is not at the forefront of everyday actions. What if there were a way to retire early that was so simple that you could do it right now with little effort. The good news for most homeowners is that it is possible.
The majority of us have a mortgage on the home we live in. The majority of us have a 30 year fixed term and the majority of these loans were refinanced within the past 5-7 years to take advantage of the lenient lending policies and great interest rates. With all that said, this group of homeowners fit perfectly into the Term Reduction program.
Take for example an original loan amount of $ 300,000 taken out in 2005. on a 30 year amortization at an interest rate of 5.75%. The current balance on a loan like this would be about $ 277,000 today. Take that same balance and refinance it for a 20 year term at a 4.875% and what you will find is that you have the same payment (give or take a few dollars) that you have been paying. Only in this scenario you will have cut 5 years from your mortgage repayment term and saved paying about $ 105,000 in additional payments.
What is great about this program is that even if the current interest rates are not exactly what will work for the term reduction, you have the option to use your homes equity to "discount" or "buy down" the interest rate. So now you are using the equity that you have in your home as an investment tool to control the interest rate you want and will benefit the from the most.
5 years off of your mortgage with minimal out of pocket costs! What is everyone waiting for? We'll most people don't know this is available or they are lazy and are afraid of change. Take that same homeowner 20 years down the road and tell them they could have done paying their home off and they will now have thousands of dollars a year in disposable income and they can pay for their kids college, live more free, have a higher positive cash flow, take vacations and so on. I assure you it would be a conversation of I should've, would've, could've.
Taking action and preparing a loan refinance like this will do so many things for you future. Doing it while interest rates are low is the best time. Its simple, costs very little and the reward is twofold, time and money. It will allow you to work less to pay your mortgage payment which in turn will give you the time to pursue your personal interests and goals towards the latter years of your life.
Forward thinking homeowners are taking advantage of this opportunity some even going to a 15 year fixed rate which with most banks is much lower than the 20 year rate. In either scenario, if you sell your home after say 10 years, your balance will be extremely lower than it would have been on your old loan which means your profit from the sale of the home will be that much greater.
The most opportunistic loan scenarios are home owners who have purchased or refinanced 5 or more years ago, have a rate of 5.75% (or higher) on a 30 year fixed term and can document their income to meet bank lending guidelines. A seasoned mortgage consultant will identify what new payment scenarios will be available for you. Even if it knocks 2 or 3 years off of your mortgage loan, it is certainly worth the effort now to save later on.