This week, I was asked to work up a mortgage plan for a new client (Bob). Bob is in his mid-50’s and 12 years left on his 15 year 5% fixed rate mortgage. He is currently paying $2400 monthly mortgage payments and other debt.
Bob wants to retire debt-free as-soon-as-possible and his reason for coming to us to refinance his mortgage to a new 12 year fixed rate mortgage. This would save him $15,000 over the next 12 years. The monthly savings is $131.00 per month.That’s a great savings, but here’s the scenario we proposed for him to review with his Financial Planner:
- Refinance to 30 year mortgage and save over $500 a month
- Apply $250.00 a month (from the $500 savings) back to his monthly debts
- Pay the lowest balance first, then the next lowest balance, and etc.
Bob and his wife would be completely debt free by 2018-2019. He should also apply, with the help of his Financial Planner, the remaining balance of the $500 to his savings/investments so that he is turning that money into an investment tool.
Click this Debt Snowball link to see how a 30 year mortgage can be paid off in less than 7 years without having to pay any additional money out-of-pocket. You’ll also have access to our free E-Book on how your Mortgage Matters to Your Financial Future by clicking HERE.