How Almost 40% of Americans Live Mortgage Free
Imagine removing one thing from your mental list of things to worry about (don’t we all have a list like this? hoping it’s not just me). Now imagine that this one thing is your mortgage. What would you do with this extra mental space? Plan a long dreamed-about vacation? Spend more quality time being truly present with your loved ones? Learn a new language? The possibilities are endless.
According to The Seattle Times, about 37% of American homeowners have paid off their mortgages, a 5.5% rise over the past ten years. Javier Vivas, economic director at Realtor.com, notes that this rise “is in line with brighter economic conditions, which is why we’ve seen the free-and-clear share increase over the last decade.”
These higher rates of mortgage-free homeowners also align with changes in homeownership demographics. Due to rising living costs and student debt, younger Americans are waiting longer to buy a home. As a result, the majority of homeowners today are older Americans who have had longer to build wealth and pay off their mortgages.
However, no matter your age as a homeowner, you can take control of your mortgage with a few financially smart strategies.
To find out more about your options for buying or selling your home, or about current interest rates, contact Pickett Street at info@pickettstreet.com or (425) 502-5397.
1. Worker smarter, not harder: calculate whether it’s worth it to pay off your mortgage.
In other words, make your money work for you. The Motley Fool, as well as other financial experts, recommends that you prioritize paying off higher-interest debt, such as credit card debt. Then, you can focus on your mortgage, which typically has a lower interest rate.
Bankrate.com also points out that “pouring money into a house that you don’t plan on living in for more than five or ten years ties up a good chunk of your liquidity for the foreseeable future. That probably won’t be in your best interest, especially if your mortgage carries a low interest rate.”
2. Make biweekly payments.
According to U.S. News, submitting a mortgage payment every two weeks instead of once a month can shave four to six years off of a typical 30-year loan. This is because, at the end of the year, biweekly payments result in 13 total mortgage payments rather than 12.
3. Put your windfalls toward your mortgage.
Received a bonus from work? A juicy tax refund? An inheritance or a financial gift from a relative? Use this money to pay off your mortgage faster. While it might not feel as instantly gratifying as a vacation or buying a new car, this decision can significantly add to your long-term financial peace of mind.
4. Budget for an extra payment each year, or put extra money toward your principal each month.
Paying an extra mortgage payment every year could reduce your repayment time by as much as seven years. If you can’t afford to make an extra annual payment, consider paying a little bit more each month—some homeowners round up their monthly mortgage payments to the nearest hundred dollars.
5. Refinance your mortgage.
Applying for a new home loan may help you qualify for a lower interest rate, and thus save money. Also, U.S. News suggests looking into refinancing for a shorter term to get out of debt more quickly. If you acquire a new 15-year home loan to replace your 30-year home loan, your monthly payments will be higher, but you could cut your interest costs in half. consumers could cut their interest costs in half over the life of the loan.
You’ve got this, Pickett Street friends and family! Here’s to a weekend spent strategizing mortgage payments and dreaming up new sparkling possibilities.
For more information about mortgages, home ownership, selling your home, and all that jazz, chat with Pickett Street about how to find what works for you (info@pickettstreet.com or (425) 502-5397.)