Becoming a homeowner is a dream that many people have. But you might actually find that the reality of having monthly mortgage payments becomes a problem after a while. Your earning potential might change, or you might just want the money to do other stuff with your life. So how can you become mortgage free and still live a life you’re happy with?
There are basically two ways of becoming mortgage free. Either pay off your mortgage as fast as you can. Or sell your home and buy a cheaper one outright or rent. Struggling to figure out which option is right for you? Here’s some insights into what each of these routes mean in reality.
Sell Your Home
This strategy is all about selling your current property, ideally at a profit. The best way to sell your home totally depends on the market in your local area, plus a whole host of other things. If you’ve made the decision to sell up, speak to some local realtors to find out what they’d value your home at, whether they have active buyers on their books, and whether they think you need to do any work to your home to get a better sale price. If you just want to sell as fast as possible, go to a specialist agency in fast sales, such as Cream City Home Buyers Milwaukee. They’ll make you an offer faster than most buyers and push through the paperwork quickly too.
Buy Again Or Rent
So in the scenario where you’ve sold your home and become mortgage free – where do you live? This completely depends on your personal circumstances. If you had enough equity in the home you sold and have walked away with a profit, you could use that money to buy another home outright. This is particularly appealing if you’re looking to downsize or simplify your lifestyle. Or if you want to move to an area where house prices are lower. Alternatively, you could rent a property instead, and you might find somewhere to rent that had lower payments than your mortgage did. But remember that rents could go up, and your landlord could give you notice to leave the property any time. Have a good think about being mortgage free is worth the higher uncertainty of the rental market. Whether you re-buy or rent after selling your home, it’s vital to consider the real estate market, potential moving costs, and the emotional implications of leaving a cherished home before making this leap.
Pay Off Your Mortgage Faster
If you’re leaning towards staying in your current home but want to relieve yourself of the mortgage burden sooner, there are several things you could do.
First off, consider refinancing to a lower interest rate if market conditions are favorable. This can significantly reduce the amount of interest you pay over the life of the loan. This is an important first step, as it’ll stop you paying extra money for nothing if there is a better deal out there.
If you’re financially able to, make more frequent payments, such as bi-weekly instead of monthly. When you crunch the numbers, it can be quite surprising how many years if can shave off your mortgage. Even paying off small additional amounts can have a considerable impact over time.
If you don’t have the extra money to spare on a regular basis, you could dedicate bonuses, tax refunds, or any unexpected windfalls to your mortgage can accelerate the repayment process. It can be tempting to spend this extra money on material things – and sometimes it’s important to treat yourself – but diverting at least a fraction of extra money you come into can be helpful.
Club Together With Friends or Family
Previously, it was common for individual families to want their own home. But financial pressures and changing habits in society more widely has seen a trend emerge, where people pool resources with friends or family to purchase property. This allows individuals to combine their financial strength, making it possible to afford a property that might be out of reach for them individually. It’s not for everyone, but is definitely one strategy that offers a pathway to mortgage-free living more swiftly. You’ll also benefit from a shared sense of community and support among co-owners. For people with children, it can also help with childcare issues, or it can be a way for people to look after their aging parents. Before choosing this route, it’s crucial to have clear agreements in place regarding the distribution of costs, responsibilities, and what happens if someone wants to sell their share. Legal advice is also a savvy thing to think about, to ensure that all parties understand their rights and obligations within this joint venture.
Consider a Side Hustle or Passive Income Streams
Relying solely on a single income source can be risky when we live in an economic climate of rapidly increasing costs. And it might not provide enough financial flexibility to pay off a mortgage early. Explore the possibility of a side hustle or passive income streams to find a game-changing way to accelerate your mortgage payments. For example, could you do some freelancing in your professional field, start an online business, invest in dividend-paying stocks, or purchase a rental property? These additional income streams can significantly boost your financial capacity to pay down your mortgage. You’ll benefit from some extra cash flow (who doesn’t love this?) and gain more financial security and independence. Take a little time out to assess the time and effort you can dedicate to a side hustle and the potential return on investment for passive income opportunities.
Choosing between selling, renting, or paying off your mortgage faster really depends on your personal and financial situation. Being open minded to more creative opportunities can help too. Just make sure you choose something that will work for you in reality.