Taking out a mortgage makes many people feel as though they are committing to making a monthly payment for the rest of their lives. Recent studies have shown that an overwhelming number of people never pay off their mortgages. Many look at refinancing as the best path to paying off their house. While refinancing can get you a lower interest rate, refinancing can be both tricky and problematic. Take a look at why refinancing may not be your best option, and what other strategies you can take to own your home as quickly as possible.
The Downsides of Refinancing
The hassle of applying for a new mortgage
Refinancing means you are applying for a brand new mortgage, and while this can help with interest rates, the process of applying for a new mortgage can be long and arduous. If you've had changes in your income or credit since you applied for your existing mortgage, this will likely slow the process or bring it to a halt altogether. A lower salary or credit score may cause lenders to reject you or approve you at a higher rate than what you're paying. Having an existing mortgage does not guarantee that lenders will approve your new application. Lenders may also request various forms of paperwork, such as tax returns and pay stubs.
While the idea behind refinancing is to save you money, don't forget that you will be paying for the refinancing. Like with your existing mortgage, you will be required to pay closing costs when you refinance, which can range between 3 to 6 percent of the loan balance. These are typically needed upfront at the time of closing, and if you're refinancing into an FHA loan, you'll also have to pay a fee for mortgage insurance. Consider whether you would be saving enough with the refinancing to more than offset the costs associated with it.
When refinancing, you first have to go through the appraisal process, which will use recent sales in the area to determine your home's value. If the appraiser determines that your property is worth less than what you owe, you may be denied a refinancing.
Tips for Paying Off Your Mortgage
Anything extra that you can put towards your mortgage each month will help save you money in the long run and help you pay it off more quickly by cutting down on interest. Just be sure to call your mortgage servicer to ensure that anything you are paying beyond your regular payment is being applied properly towards the loan.
Make extra payments
One option to help you is to make payments beyond your monthly payment. If you can afford to make one full additional payment per quarter, you will be in great shape toward shaving down that mortgage. If once per quarter is too much, try to make one extra payment per year.
Add to your monthly payment
Another option is to divide your monthly fee by 12 and add that amount to your monthly payment, which will then add up to one full extra payment each year. It can even be as simple as rounding your payments up, which will allow you to pay a little extra each month.
Switch up your payment schedule
Contacting your lender to switch to bi-weekly payments instead of monthly payments can also help cut down on cost and time, and you'll barely even notice.
This is because paying bi-weekly means you're making more payments a year, than you would be paying monthly, you can shave up to six years off a 30-year mortgage.
Put extra money to work
If you receive a raise or a bonus, up your payments accordingly, consider putting your tax returns or any “found" money, such as an inheritance or even a winning poker hand, towards your mortgage. If you have investments, such as bonds or CDs, that are maturing, you may think about putting the principle, the earnings, or both towards your mortgage payment, rather than reinvesting. Making a lump-sum payment can make a considerable dent in the interest.
Check your mortgage terms
However, if you do plan on making extra payments towards your mortgage, look into the terms of your loan. Some mortgages have prepayment penalties, which means you could be incurring a fee if you try to make extra payments or increase your monthly payment. Other mortgages may allow prepayments, but only at certain times during the loan. Give your lender a call to help clarify the terms, and to find out if there are any specific actions you must take to ensure that your payments are being put to use correctly.
Your mortgage is most likely the largest loan you will ever take out, and imagining life without a mortgage payment may seem like a far-off dream. Many people who feel this way often turn to refinancing without taking into account the potential disadvantages that come along with it. While refinancing can be a good option for some, it is essential to do your research to find out whether refinancing will truly be worth it for you in the long run. Refinancing is not the only strategy to pay off your mortgage in this lifetime. By giving your mortgage a little extra attention, and making sure that you know the terms of your loan, life without a mortgage payment could be closer than you thought.
"Sh*t!" my daughter exclaimed as she dropped her iPad to the floor. A little bit of context; my daughter Victoria absolutely loves her iPad. And as I watched her bemoan the possible destruction of her favorite device, I thought to myself, "If I were in her position, I'd probably say the exact same thing."
In the Rastegar family, a word is only a bad word if used improperly. This is a concept that has almost become a family motto. Because in our household, we do things a little differently. To put it frankly, our practices are a little unconventional. Completely safe, one hundred percent responsible- but sure, a little unconventional.
And that's because my husband Ari and I have always felt akin in one major life philosophy; we want to live our lives our way. We have dedicated ourselves to a lifetime of questioning the world around us. And it's that philosophy that has led us to some unbelievable discoveries, especially when it comes to parenting.
Ari was an English major. And if there's one thing that can be said about English majors, it's that they can be big-time sticklers for the rules. But Ari also thinks outside of the box. And here's where these two characteristics meet. Ari was always allowed to curse as a child, but only if the word fit an appropriate and relevant context. This idea came from Ari's father (his mother would have never taken to this concept), and I think this strange practice really molded him into the person he is today.
But it wasn't long after we met that I discovered this fun piece of Ari Rastegar history, and I got to drop a pretty awesome truth bomb on Ari. My parents let me do the same exact thing…
Not only was I allowed to curse as a child, but I was also given a fair amount of freedom to do as I wanted. And the results of this may surprise you. You see, despite the lack of heavy regulating and disciplining from my parents, I was the model child. Straight A's, always came home for curfew, really never got into any significant trouble- that was me. Not trying to toot my own horn here, but it's important for the argument. And don't get the wrong impression, it's not like I walked around cursing like a sailor.
Perhaps I was allowed to curse whenever I wanted, but that didn't mean I did.
And this is where we get to the amazing power of this parenting philosophy. In my experience, by allowing my own children to curse, I have found that their ability to self-regulate has developed in an outstanding fashion. Over the past few years, Victoria and Kingston have built an unbelievable amount of discipline. And that's because our decision to allow them to curse does not come without significant ground rules. Cursing must occur under a precise and suitable context, it must be done around appropriate company, and the privilege cannot be overused. By following these guidelines, Victoria and Kingston are cultivating an understanding of moderation, and at a very early age are building a social awareness about when and where certain types of language are appropriate. And ultimately, Victoria and Kingston are displaying the same phenomenon present during my childhood. Their actual instances of cursing are extremely low.
And beneath this parenting strategy is a deeper philosophy. Ari and I first and foremost look at parenting as educators. It is not our job to dictate who our children will be, how they shall behave, and what their future should look like.
We are not dictators; we are not imposing our will on them. They are autonomous beings. Their future is in their hands, and theirs alone.
Rather, we view it as our mission to show our children what the many possibilities of the world are and prepare them for the litany of experiences and challenges they will face as they develop into adulthood. Now, when Victoria and Kingston come across any roadblocks, they have not only the tools but the confidence to handle these tensions with pride, independence, and knowledge.
And we have found that cursing is an amazing place to begin this relationship as educators. By allowing our children to curse, and gently guiding them towards the appropriate use of this privilege, we are setting a groundwork of communication that will eventually pay dividends as our children grow curious of less benign temptations; sex, drugs, alcohol. There is no fear, no need to slink behind our backs, but rather an open door where any and all communication is rewarded with gentle attention and helpful wisdom.
The home is a sacred place, and honesty and communication must be its foundation. Children often lack an ability to communicate their exact feelings. Whether out of discomfort, fear, or the emotional messiness of adolescence, children can often be less than transparent. Building a place of refuge where our children feel safe enough to disclose their innermost feelings and troubles is, therefore, an utmost priority in shepherding their future. Ari and I have come across instances where our children may have been less than truthful with a teacher, or authority figure simply because they did not feel comfortable disclosing what was really going on. But with us, they know that honesty is not only appreciated but rewarded and incentivized. This allows us to protect them at every turn, guard them against destructive situations, and help guide and problem solve, fully equipped with the facts of their situation.
And as crazy as it all sounds- I really believe in my heart that the catalogue of positive outcomes described above truly does stem from our decision to allow Victoria and Kingston to curse freely.
I know this won't sit well with every parent out there. And like so many things in life, I don't advocate this approach for all situations. In our context, this decision has more than paid itself off. In another, it may exacerbate pre-existing challenges and prove to be only a detriment to your own family's goals.
As the leader of your household, this is something that you and you alone must decide upon with intentionality and wisdom.
Ultimately, Ari and I want to be the kind of people our children genuinely want to be around. Were we not their parents, I would hope that Victoria and Kingston would organically find us interesting, warm, kind, funny, all the things we aspire to be for them each and every day.
We've let our children fly free, and fly they have. They are amazing people. One day, when they leave the confines of our home, they will become amazing adults. And hopefully, some of the little life lessons and eccentric parenting practices we imparted upon them will serve as a support for their future happiness and success.