1. Cash-out to pay off credit cards.
Credit cards routinely carry higher interest rates than mortgages do. If high interest credit card debt is a problem, consider cashing out some of your home’s equity and refinancing you mortgage. If you’ve got $10,000 in credit card debt at 15% interest, you can cash out some of your home’s equity—which is already your money—and pay it off, rolling that credit card debt into your mortgage at a much more manageable single-digit rate. This can save you thousands of dollars over the years, leaving you with more cash in pocket to contribute to a retirement fund which will earn you interest rather than you paying interest to your credit card company. If you wish, you might be able to cash out additional equity to make a nice deposit to your retirement fund as well.
2. Refinance your mortgage to a shorter term.
While your monthly payments on your mortgage might increase a bit, reducing the term of your mortgage is a great way to plan ahead for retirement. Just think—if you are 30 years old take out a 30-year mortgage, you’ll be just shy of retirement age by the time you pay it off. But if you refinance that 30-year mortgage into a 15-year term, you’ll have the house paid off much sooner—freeing up income for a retirement account. Not only will you have income freed up to put into a retirement account—but you’ll save tens or even hundreds of thousands of dollars in interest, which is also setting you up for retirement success.
3. Refinance to take advantage of low interest rates.
When it comes to rate, remember that it is only a small part of the consideration list when refinancing your home. However, refinancing at a lower rate can, indeed, save you money not only monthly, but on the life of your loan. If you bought your house at a higher interest rate, it could be worth your time to give us a call to see if we can get you a better rate and save you some money that way. Remember, too, that there are other important considerations as well: do you have debt you could pay off with your equity? Do you want to cash out some of your equity to put into a retirement account? An NLC Loans™ personal mortgage advisor can help you answer all those questions, and possibly achieve a better interest rate at the same time.
4. Open an individual retirement account.
Choose from a traditional IRA or a Roth IRA. With a Roth, you will be able to save for retirement in affordable increments throughout your life. There are tax benefits to both traditional and Roth IRAs. Of course, if you are considering opening an IRA, you’ll need to fund it somehow: and a great way to do so is with a cash-out refinance from your mortgage.
5. If you’re over 62, get a reverse mortgage on your home.
Your home is one of the biggest assets you will ever own, and for those reaching retirement age, it’s most likely going to be paid off and will be owned free and clear. A reverse mortgage lets you borrow money from the value of your home, and in the interim, you’ll still get to own and live in it. For many folks, reverse mortgages are a great way to gain access to much needed cash without having to sell their homes.
The best way to plan for retirement isn’t just one of these five methods—it’s a combination of all five. Strategizing your mortgage and income now before retirement and you’ll be golden for your golden years.