For most homeowners, deciding whether to refinance can be as simple as determining how much you can potentially save given a lower interest rate. But, if you are close to retirement, you need to take a broader look at your overall financial plan before determining if refinancing is right for your situation. Keep reading to learn more how refinancing can help pave the way to retirement. If you think refinancing is a great option for you, your next step should be filling out your free rate quote.
Should I retire with debt?
Retiring without debt is ideal, but for some people, it may not be a problem. As long you have steady cash flow, such as from a pension or Social Security benefits, and are capable of making your mortgage and credit card payments, it shouldn’t be a risk. If you are relying solely on the market for your retirement income, it would be better to eliminate your debt prior to retiring.
What are my refinancing options?
Refinancing your mortgage allows you to reset your current mortgage with different terms. Depending on your financial situation, your may have the option to refinance your mortgage to take advantage of lower payments. However, this could lengthen the loan’s term, causing you to extend pay off time. If a shorter term is desired, remember while you may be able to pay your mortgage off sooner, it typically leads to higher monthly payments. However, you'll pay less interst over time if you choose to go with the 15-year fixed-rate conventional mortgage as opposed to a 30-year fixed-rate conventional mortgage. As long as you plan to stay in your property for at least 10 years and can qualify for a lower interest rate, refinancing allows you to use your savings toward your retirement.
Are there any tax deductions?
Some homeowners think it's smart to keep a mortgage into retirement for the tax deduction. However, retirees are usually in a lower tax bracket, reducing the value of the deduction. Also, near the end of the mortgage, the majority of the monthly payment goes to the principal rather than the interest.
Ultimately, some pre-retirees may sleep better at night knowing they will retire debt free. Are you interested in seeing how much refinancing can help you plan for retirement? Our average customer saves $3,240* a year on their mortgage! If you ever have any questions, make sure you contact a mortgage advisor. Don’t forget to fill out your free rate quote if you are ready to purchase your dream home or are looking into refinancing!