Pay Off Your Mortgages and Avoid a Retirement Funds Crisis with These Tips

While most people worry if their retirement funds are enough to sustain their life when they retire, they tend to forget they also have to deal with paying for their home mortgages. How can you pay off your mortgage without reducing your house’s value or affordability to avert a crisis of depleting your retirement funds?

The real-estate experts recommend these policy changes to be implemented to help borrowers pay off their mortgages early.

Accelerate Equity Growth Without Compromising Its Affordability

The Americans back then enjoyed availing of an affordable mortgage due to this public policy. This means that the public doesn’t need to place a downpayment in his or her loan balance for the first 5-10 years. They also offer an ARMs option to the borrowers, which allows the applicants to make payments without covering the full interest. While this method was good, it resulted in a loan balance increase, which was hailed as the negative amortization.

According to the experts, the public policy offers mortgage affordability instead of the repayment rapidity since the 1930s.

These instruments were long gone since the 2008 Recession, in which the interest rates had emerged in every 5, 10, or 30-year fixed mortgage rates. Despite this setback, the good thing is that most mortgage lenders today still thrive on offering an affordable policy.

Try looking for a mortgage lender who offers affordable mortgage rates and accelerates your equity growth. In this way, you can pay off your mortgage rates faster while your house’s value continues to increase.

Eliminate the Need to Pay for Fixed Monthly Payments

According to the experts, you should also look for a mortgage lender who allows flexibility when it comes to your monthly payments. Most traditional mortgage lenders implement a fixed monthly payment, depriving their borrowers of accumulating reserves to skip or lessen their future payments. The experts recommend you discuss with your real estate agent if they can provide a schedule for paying the minimum required balance instead.

According to the experts, mortgage lenders should offer payment flexibility to their clients since there are times they will have more than enough money (like Holiday bonuses) to pay for their mortgages.

For example, the initial or first required payment would be to pay the full amortization amount. But in the next succeeding months, the borrower should have the flexibility to pay in any amount they wish (as long as it meets the minimum balance in that particular month). In this way, the extra money they pay will be credited to his next monthly payment, allowing them to pay less and accumulate reserves while meeting their required balance until they settle their mortgages in no time.

Have Reserve Accounts.

The real-estate experts add the implementation of payment flexibility as discussed above enables the borrower to build a reserve account.

Not only can the borrower pay off their balance early, but they also develop the habit of saving since they would want to keep accumulating their reserves to make fewer payments until their loan is fully paid.

Aside from that, this habit of accumulating reserve cash will free the consumers from basing their financial decisions based on their monthly payments.

Payment myopia is a condition where consumers are making bad financial decisions based on their present payment affordability and purchasing power without considering their future capability

Instead, they’ll think how their financial decisions will affect not only in their affordability to pay their mortgages but also their wealth and retirement funds too. Studies show those consumers who depend on “payment myopia” has less significant wealth compared to those who accumulate their reserves ahead of time.

It’s because they nearly use all of their retirement funds in paying their mortgages after their retirement, with no income coming in.

Adapting Loan Servicing Systems

Mortgage lenders should also implement interactive loan servicing systems to allow their clients to try out alternative payment schemes. The more the borrowers have access to paying their loans, the easier they can pay their dues on time.