For those in their 50s and 60s, Social Security is still a pretty safe bet. But for those in their 20s, 30s, and 40s, a dependency on Social Security is downright dangerous. The program has become a point of contention among all working Americans, and its stability has been seriously brought into question.
Naturally, many younger Americans feel that they have bigger fish to fry. Those seemingly everlasting student loans are a burden for many; so much so that retirement funds often become a thought equivalent to sugar plum fairytales. Sure, their employer offers a 401(k) program that they’re contributing a few bucks per paycheck into—but is it really enough to cover ten or even 20 years of living expenses?
Despite the student loan debt and other common financial obligations, home ownership is certainly a goal for most Americans—young and old. The American dream is still alive and well from sea to shining sea, and with mortgage rates at all-time lows and a housing market that’s healthier than a vegan distance runner, more younger Americans are taking out mortgages and taking the leap of home ownership. The average age of first time homebuyers in the U.S. is just 34 years—and within a matter of five or six years, those in their early 40s are building up equity quickly. The pity is that most of them aren’t quite sure what to do with it.
Dale Vermillion has already explained that a home isn’t just a home—it’s an investment. Sure, the physical structure of your home is where you live and raise your family—but at the end of the day, it’s more than just walls and a roof—it’s a non-liquidated heap of cash that many don’t quite know how to tap into. The best part of it all is that it can be tapped into again and again, and can be used to secure your golden years so that you can finally spend time without tons of financial obligations and burdens, but rather doing what you like with your loved ones.
So, back to retirement. Homeowners have an incredible asset on their hands that is able to assist them with building a solid future so that they can rest easy: their equity. Depending on the age of the mortgage and the down payment that was put down at the time of financing, homeowners can be sitting on tens or even hundreds of thousands of dollars in some cases. With each payment made to the mortgage company, their equity grows and grows.
As mentioned above, mortgage interest rates are at historic lows. Compared with even a few years ago, rates have plummeted by a full percentage point or more. So what does that mean? It means it’s time to refinance, and it’s time cash out some of that equity for you to place into your 401(k) or an IRA so that you can retire comfortably. In the meantime, you’ll also be lowering your monthly payments.
Refinancing your mortgage with a lower interest rate is the perfect time to save for retirement. What’s even better is that borrower’s get to do it with their own money, and they can even match their new mortgage’s term to the remaining balance they had on their old loan. It works like this: If you’ve been paying off your home for ten years and you’ve got $25,000 in eligible equity to cash out, you can refinance at a 20 year term at a much lower interest rate, cash out that eligible equity and invest it wisely to prepare you and your family for that wonderful day you can set foot in the office for the very last time. In the meantime, you monthly payment might even decrease from what you’re used to paying since your interest rate on your new mortgage will be much lower. Not a bad deal, right?
Most people don’t understand the role that their mortgage should play in shaping their financial future. Many have only one goal in mind when it comes to home ownership: paying off the home and living there happily ever after. The sweet spot, though, is to be able to do both of these things at the same time: refinancing strategically and paying off the mortgage faster in the meantime.
For more information on how to utilize your mortgage to help you save for retirement, contact an NLC Loans™ personal mortgage advisor.