Real Estate Q&A: With Retirement in Full View, Try to Avoid Refinancing

QUESTION: I have five years left until I pay off my 30-year mortgage. I received an offer to refinance, which certainly is tempting, but I’m getting pretty close to retirement. Should I lighten my burden now or try to hold on for five more years?

ANSWER: While a lower payment would be appealing, I think you should try to avoid refinancing, if at all possible. Mortgage loans are amortized, which means you spend the early years paying most of the interest for the entire loan. In the later years, your payments are almost entirely principal.

You’re nearly home free — literally. You will have a much easier retirement without having to make those house payments. You can use the extra money to enjoy life. There is great security in owning your home free and clear. If you do end up needing money in retirement, you could always tap into your home’s equity through a reverse mortgage and still not have a monthly payment.

But if you absolutely need a lower payment now, you should try to refinance with as small of a loan as you can for the least amount of years.
For example, if your original loan had a monthly payment of $1,000 with a 6.5 percent interest rate, you could refinance with a 10-year loan at current rates and lower your payment to only $500 a month. But remember that while you would be cutting your payment in half, you’d also be on the hook for an extra five years. Is that worth it?

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About thenoelteam

As a Broker with RE/MAX Alliance, I work energetically for my clients whether they are a buyer or seller. I help you achieve your goal of owning a home or getting the best price for your home in the shortest time possible. After graduating from UCLA with a degree in communications and finance, I was licensed in 1977 and since then I have sold over 3600 properties amounting to over $1 billion in sales. I currently rank in the top 10 in home sales for Colorado. I offer the same quality of service and superior communication to all clients, ranging from starter homes to multi-million dollar estates, commercial and income properties, relocations and foreclosures My goal is to provide you with the best representation possible whether you are buying or selling. Over the years, one of the things that I've discovered is that there is a difference in the way individual Realtors do business. For me, I have always felt that honesty and personal integrity are the foundations upon which a successful business and career are built and sustained. I have an extensive background and knowledge base in real estate, including financing, which has enabled me to provide outstanding, quality advice and service not found with many agents today. My commitment to communication creates a positive relationship between my client and myself that results in a successful property sale or purchase. My passion for real estate, commitment to my clients and personal integrity has helped me to achieve success placing me in the top 1% of all brokers in nationwide. In my career, I have earned a number of awards and received considerable recognition for my success but the most significant recognition comes from the fact that over 75% of my business comes from past clients. My success is a true measure of my client satisfaction.
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