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We relocated a year ago to a neighboring state with a much lower cost of living. We are in our mid 40's and a family of 4. We downsized from 3400 sq ft to 2400 sq ft. We also did a 15 yr mortgage plus I have also been sending extra towards the principle. Some ask why not do a 30yr for lower payments? I'm in my 40's, I want it paid off! Sooner the better! Since I can comfortably make the payments, why not!
49 years old, one and a half years into my first home. I plan to keep it and retire at age 70 minimum. I have been paying an extra $100 on the principal each month. I plan to bump that number up to an extra $1300 a month toward the principal shortly! Single, no dependents and no car loan.
We were in a 30-year and paying extra, but then we opted to go into a 15-year because we qualified for 3.1%. We paid on that for about three years and then decided to play it safe and get back into a 30-year and pay extra but have the flexibility to hold back the extra in lean months. We were worried about job volatility and didn't want to risk the house if one of us got laid off, so we're back in a 30-year (at 4.25%) and will pay extra each month as able so that we can still get the house paid off before we retire.
I suppose it's great to be mortgage free...but even in your 40's?
I would not want to pass up all the compounding returns I could be getting on retirement savings...and there are tax savings there too. Saving even small amounts early in your career can have HUGE dividends. Don't throw ALL your money into your house saying you'll make it up with huge retirement savings later, because you'll still end up behind...put SOMETHING into retirement all along - at least 10% of your gross.
I have a 15-year fixed. It will be paid off in 2 years. I will be 47. We could have paid it off early, but between the tax deduction and low, fixed interest rate it makes more sense for us to invest extra money. We earn more on it than we would save paying down the mortgage.
Also wanted to add that our home's value has increased by nearly $200K in the 13 years we've owned it. Bought it for $280K and it's worth about $450K now.
I suppose it's great to be mortgage free...but even in your 40's?
I would not want to pass up all the compounding returns I could be getting on retirement savings...and there are tax savings there too. Saving even small amounts early in your career can have HUGE dividends. Don't throw ALL your money into your house saying you'll make it up with huge retirement savings later, because you'll still end up behind...put SOMETHING into retirement all along - at least 10% of your gross.
We max out our retirement contributions (401Ks and IRAs) and will still have our house paid off in our 40s. It's not always a one or the other situation.
We relocated a year ago to a neighboring state with a much lower cost of living. We are in our mid 40's and a family of 4. We downsized from 3400 sq ft to 2400 sq ft. We also did a 15 yr mortgage plus I have also been sending extra towards the principle. Some ask why not do a 30yr for lower payments? I'm in my 40's, I want it paid off! Sooner the better! Since I can comfortably make the payments, why not!
It's not just lower payments. The total cost of the loan at the end of the term will be much less.
So I've been thinking about scenarios where home buyers are in their mid-late 30's or early-mid 40's. They may already have a modest home, perhaps are a bit pinched on space, but can get by. The mortgage is low enough that they can have the house paid off by retirement age, or if they want to pay it off significantly earlier (and retire earlier), they can make extra principal payments or do a 15-year mortgage instead of 30-year. It could mean retiring at 50-55 years of age instead of 65+ years of age or continuing to have to work up to 70 years of age due to still having mortgage payments.
How many of you in the aforementioned age range are opting to buy nicer, move-up houses that are almost double the payments once you factor in property tax and other things and looking to continue making mortgage payments even after retirement?
Are there those of you who are instead opting to stick with the house you have now and pay it off sooner because you don't want to still be making mortgage payments post-retirement?
Or if you don't have the means to make the nearly double payments required to pay off a mortgage on a nicer, move-up house so you can retire early, are you still going for the nicer, move-up house even if it means you'll be making mortgage payments on it up to until you're perhaps 70 years old?
When you reach a certain age, does the dream home come at too high a price in time/money for you to consider a possibility anymore? Or do you look at it as something you enjoy but don't intend to pay off in your lifetime?
If I may offer some sage advice. Many years ago we bought our house on a 25 year mortgage, about about 7-8 years later we were doing well, interest rates had dropped, and decided to refinance for a 15 year mortgage, I was in my 40's so figured we be paid off well before retirement. Well, as life goes, the unforeseen happened, about a year after we re-financed, I got laid off. If we had kept the 25 year mortgage we probably could have made it, but at 15 yr, it was over our heads. We ultimately saved our house, through a state program and working our asses off. So, take the longest term mortgage you can, and make extra payments, and if something happens, you have a fall back plan. Good luck.
If I may offer some sage advice. Many years ago we bought our house on a 25 year mortgage, about about 7-8 years later we were doing well, interest rates had dropped, and decided to refinance for a 15 year mortgage, I was in my 40's so figured we be paid off well before retirement. Well, as life goes, the unforeseen happened, about a year after we re-financed, I got laid off. If we had kept the 25 year mortgage we probably could have made it, but at 15 yr, it was over our heads. We ultimately saved our house, through a state program and working our asses off. So, take the longest term mortgage you can, and make extra payments, and if something happens, you have a fall back plan. Good luck.
That is exactly my thinking......Right now I am flush, bills are getting payed down at a nice rate...I am maxing out my 401K each year...etc. pay extra while I can. But I bought my house planning on things not being flush and decided on a 30 year fixed to make sure I could at least make the mortgage payment if things went south. Life is life and can throw any number of surprises at me, so if worse comes to worse at least i tried my best and could hopefully sell for a profit
Like snowtired14 and cargoman stated, the lower payments of a 30-year are great if you want a little safety net should finances change. If you are disciplined enough to make extra payments, you may still be able to pay it off in 15-20 years. In that scenario, the only downside is the higher interest rate you have been paying, which is the trade-off for the safety net.
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