Suze Orman Shares Advice for Paying Down Your Mortgage Faster
Suze Orman Shares Advice for Paying Down Your Mortgage Faster
Personal finance guru Suze Orman has a cornucopia of helpful advice. Among her tips, she suggests paying off your mortgage by the time you retire. Whether you have a 15- or 30-year mortgage, here’s Orman’s advice for paying down your mortgage faster.
Why Should You Pay Off Your Mortgage as Quickly as Possible?
Putting extra money toward your mortgage might seem like a financial hardship. After all, your mortgage loan is set up to pay out within 15 or 30 years — all you have to do is make the required payments in full and on time. Plus, isn’t it better to invest or save any extra money you have in your budget?
In certain instances, Orman said, the answer is no. “Don’t you want to feel safe in these seriously uncertain times — uncertain times about inflation, uncertain times about what the markets are doing, uncertain times about everything?” Orman asked in her February 2022 podcast. “The best way you can put certainty in your life is to own your home outright by the time you retire.”
Orman said she doesn’t recommend this strategy if you’re 35 and know you’re going to move in three or four years. But she does believe that if you are older and your goal is to gain financial security and safety, paying off your mortgage as quickly as possible is a wise idea.
“Paying more on your mortgage could help you earn equity faster, reduce the total interest you’ll pay over the life of the loan and, ultimately, allow you to repay your mortgage more quickly,” said Felton Ellington, community lending manager at Chase. “That’s because making payments directly to the principal reduces the total amount of interest paid because interest is calculated as a percentage of the principal. Typically, the lower the principal, the less interest owed.”
Orman’s Advice for Paying Down Your Mortgage Faster
Here’s what you need to do to make your mortgage payments history, according to Orman.
Consider the Loan’s Interest Rate
The lower your loan’s interest rate, the faster you can potentially pay it off. However, if you’re thinking about refinancing to get a lower rate, Orman said to proceed with caution.
“The big mistake is that after spending years paying down their existing 30-year mortgage, people then refinance into a new 30-year mortgage,” Orman once wrote on her blog. “This is so very wrong. … My rule of refinancing is that you are to never extend your total payback period past 30 years.”
Orman explained that if you have a 30-year mortgage and you’ve already made payments for 14 years, you should make it a point to get a refinanced mortgage paid off in 16 years. Otherwise, if you refinance for another 30 years, you’ll end up paying for your mortgage with interest for 44 years in total.
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