Not an Impossible Dream
If someone told you a simple mortgage payment calculator could change your standard of living in retirement, it would seem improbable. If they also told you it was possible to pay off your mortgage years early and buy retirement rental income property, it would seem an impossible dream. Yet, if you understand just a few concepts and put them to work as a part of your retirement plans, this is a dream that can become reality.
It is a commonly accepted truth by experienced financial planners that one of the secrets to financial freedom during retirement is to have no debt. The less debt service you have, the smaller the amount of savings you need to generate income for maintaining your desired lifestyle. Many Americans typically enter retirement with several financial problems. These include:
- Too little savings
- Too much debt
- Too little income without continuing to work at least part-time
Instead of owing on their home, most retirees would benefit from having rental property that generates steady passive income. According to Bank Rate, this is a perfect way for many senior citizens to augment their monthly income. So, you might, ask, how can one actually have their home debt free and also own other real estate that generates this income?
We have some simple, practical answers to this question at Half A Payment™. Our website has a number of tools, such as our mortgage calculator with extra payment that allows you to learn some very interesting facts about the interest you pay on your mortgage.
Paying for Your House Two or Three Times
Many people never realize that the way mortgages are structured, you end up making enough payments to pay for your house more than twice. The difference ends up in the interest that is paid to the mortgage lenders. If you have a traditional 30-year mortgage, our extra mortgage payment calculator will show you just how much you pay in interest over the life of your loan if you only make the monthly payments as scheduled.
Just using a simple mortgage payment calculator doesn’t tell you the whole story. You have to understand that when you make your monthly payment, it goes first to paying the interest on your outstanding balance. For the first 20 years or more, that means you pay mainly interest every month. That might be a nice tax deduction, but it won’t help with retirement. We use our tools to how you how to 1) make half your monthly payment twice a month and 2) add a little more to each of your payments. That means that each month more of your payment goes to reducing the balance. That, in turn, means that your outstanding balance is reduced. The ripple effect is shoen by our mortgage calculator with extra payment. The savings continue the next month as you owe less on your loan and, therefore, less of your payment goes to interest. So, once again, you get more of a reduction in the interest to be paid.
Our mortgage calculator with extra payment shows how you can save tens of thousands of dollars in interest payments on your mortgage and pay it off years earlier. Once you are doing that, you’re in the position to turn that extra cash flow into a way to buy one or more rental properties. You can then use the same concept all over again and even get your rental properties free of debt.