Paying off your mortgage will bring peace of mind in your retirement, but it will tide up your money in the short-term.
Before you decide to payoff the mortgage, you should review our financials.
If you have other debt, like credit card balance, or other high interest debt, you should pay those off first.
Review your retirement savings – you should make maximum contribution into your retirement accounts to take the tax-advantage on your retirement fund.
Make sure you have enough emergency fund in case something bad happen. During your work like, at least 3-6 months is recommended. During your retirement and bad economy, at least 9-12 months is recommended.
Remember: Payoff extra or payoff full on your mortgage is easy, but cash out equity from your home could be difficult when you retire.
There are two common strategies to payoff your mortgage quicker, instead of using a lump-sum of your fund:
Refinance your 30 year loan to a 15 year loan – Of course, you need to make sure you have a lower interest rate and the closing costs are justifying the action.
Make extra payments to your mortgage – you can send in extra payment to your principal each month along with your regular payment or you can make a biweekly payments to add an extra payment each year.
Tip: some lenders will set up a biweekly payment plan for a fee, but do not waste your money because you can do this on your own.
* Message from your Real Estate and Mortgage Broker, Andy Lam, email@example.com, 408-218-2513