Should You Refinance Close To Retirement?

annuity educationMost pre-retirees are trying to reduce debt before their last day of work, not extend the amount of time they’ll be on the hook for payments.

 

Still, for some homeowners with retirement on their minds, it makes sense to trade their higher mortgage rate for one near record lows, said Keith Gumbinger, vice president of HSH.com, a publisher of mortgage and consumer loan information. The money saved each month on your mortgage can be poured into other investments that could pay off in retirement, “whether that’s a 401(k) or IRA or cleaning up other debts,” he said.

 

If you haven’t refinanced in the past few years, your monthly savings can be substantial. The 30-year fixed-rate mortgage averaged 3.34% for the week ending Dec. 6, while the 15-year fixed-rate mortgage averaged 2.67%, according to Freddie Mac’s weekly survey of conforming rates. For those with a current mortgage rate near 5%, refinancing could mean significant improvement to their monthly cash flow.

 

Consider this: A homeowner who’s 52 today and who wants to retire at 70 bought a home in 2002 with a $250,000 mortgage. He refinanced at 5% in 2003. If he refinanced again into a 3.49%, 30-year fixed-rate mortgage, his payment would go down $415 a month, according to Gumbinger’s math.

 

The downside is the loan wouldn’t be retired until he is 82, and it would cost $3,432 more in interest over its lifetime than if he didn’t refinance. To make that kind of trade-off work for you, it’s critical to ensure the increased cash flow is used productively.

-MarketWatch

 

Retirement Planning | Retirement Strategies

 

 

 

Enhanced by Zemanta
The articles displayed in RetirementThinkTank.com are for educational purposes only. Be sure to seek out personalized guidance from a licensed advisor/agent in your state for your insurance, investment, or tax planning needs.

Tags: , , , , , , , , , , , , , , , , , , , , , ,

2 comments

  • Hello, guest