One Easy Change Leads to Big Results
What’s your retirement dream? Many people want to move to a dream location in retirement, or at least travel frequently. Most have some activities in mind, or want to spend more time with family and friends. But the most common retirement dream is probably something fairly simple. It’s not glamorous or luxurious in any way, although it can lead to a much more comfortable lifestyle…
Most people want to retire free of debt. In particular, it would feel fantastic to be free of that enormous monthly mortgage, wouldn’t it?
Owning a home outright used to be a central part of the American Dream. But these days, many of us purchase several homes throughout the years, taking out a 30-year mortgage each time. You might now feel as though you don’t have time to pay off your mortgage before you retire, and have resigned yourself to carrying that debt forward into your golden years.
However, there is one simple change you can make, that will allow you to pay off your mortgage several years sooner. If your mortgage company allows it (and most do), you can switch from a monthly payment schedule to a biweekly one. This is an easy change for anyone on a biweekly salary plan, but theoretically anyone can do it.
How does that help? It’s simple: There are 12 months in a year, so right now you’re making 12 mortgage payments each year. But since there are 52 weeks in a year, switching to a biweekly payment plan means you’ll be making 26 half-payments in the same time period. And that equals out to 13 full payments; you’re making an extra payment each year.
One extra payment per year doesn’t sound like it would make much of a difference. But for most situations, it will shorten the term of your mortgage by five years or more! You’ll also save thousands of dollars in interest, over the life of the loan.
If you’re already on a biweekly payment schedule at work, switching your mortgage payment will be easy. It will force you to budget just a little bit better, but most people don’t notice a dramatic difference in their spending freedom. They do notice a difference when their mortgages are paid off years in advance, though!
If you decide to switch to a biweekly payment schedule, do investigate whether your mortgage company charges a fee for doing so. You want to avoid any surprises. And for other budgeting, saving, or retirement planning tips, remember to schedule regular appointments with us. We can help you identify other creative strategies that will help you reach your goals more efficiently.