“Pay off your mortgage before retirement, and that’s one less bill you’ll have to worry about when you’re on a fixed income.”
~ Suze Orman
According to the Institute on Assets and Social Policy, as many as one-third of the senior households in the United States have no money to spare after their essential monthly expenses. At the same time, 14% of Americans nearing the retirement age of 65+ years have a negative net-worth.
Are these facts horrific? Do you own a mortgage? Well, most adults do not picture themselves in this category and often presume their financial well-being after retirement. Is that a smart choice? No, it is not, and the correct measure is to assess your financial situation and prepare a strategy to pay down your debts as soon as possible.
If you own mortgage debt, here are some everyday practices that you need to forfeit as soon as possible.
Keeping a high balance on a credit card
Let us face it; credit cards have turned average individuals into cavaliers when it comes to spending. People often max out their credit card limits without understanding the consequences. Credit union agencies consider people who use 30% or lower available credit as thoughtful spenders, and having a higher credit card balance indicates otherwise.
If you are having trouble keeping down your credit card balance, use three credit cards and distribute the balance equally. It will allow you to maintain a decent credit profile while having all the funds necessary to get by.
Missing or late payments in your credit history
This is the last thing that you would want to do while searching for a refinance loan or trying to pay it down quickly. Missed or late payments indicate that the individual is unable to manage his/her finances properly.
Make sure to make timely payments and avoid paying only the minimum amount for your credit card bills.
Early repayment of an installment loan
Contrary to popular belief, it is helpful to maintain different types of credit accounts such as student loans, a mortgage, and a car loan. It indicates that you are able to manage multiple credit streams efficiently, and banks would love to see a borrower with solid history of timely payments. In fact, credit agencies consider the length and payment history of closed as well as open credit accounts.
You should balance different types of credit repayments and distribute them evenly.
Walking away from your mortgaged property
This is the worst idea for any homeowner with an existing mortgage because it will stain your credit score for the next several years. For owners who choose to walk away from properties voluntarily, their credit score is likely to drop by 100 points and the transaction will show up in their credit report for seven years.
A short sale is no different, and it can help you only if the bank remarks it as “paid satisfactorily.” In fact, if the bank reports the sale as “settled for less than full amount due,” it can have a similar effect on your credit score as that of a foreclosure.
The road to financial freedom is somewhat difficult, yet achievable. If you are ready to make some sacrifices today, you will enjoy a debt free life tomorrow.