It’s a big decision? Should you rent, or should you buy?
Your family and peers will certainly all have an opinion about this. But what do personal financial experts have to say?
David Bach, the author of the recent NY Times bestseller The Latte Factor, advises you to buy. He calls homeownership the “escalator to wealth in America”. One of the secrets of people who retired at 50 was an early payoff of their mortgage, he says.
Here are 4 techniques to pay your mortgage off early:
- Add 10% to your monthly payment, verifying with your bank that it gets applied directly to your principal. For example, if your payment is $1,000, make $1,100 payments instead. This can reduce up to 5 years from the life of your mortgage.
- Make bi-weekly payments instead of monthly. This ends up being the equivalent of an extra payment each year. Twenty-six half-payments are the same as 13 full payments. Find out how this can impact your mortgage lifespan with THIS CALCULATOR.
- Make an extra payment each year. Use a raise, a bonus, or a windfall to apply an extra payment toward your mortgage.
- Switch to a 15-year mortgage. Not everyone is able to do this, but if you can do it, it could save you hundreds of thousands of dollars in interest.
Bach is not entirely against renting. He suggests you consider it in the following situations:
- You expect to move in the next three years. If you know you’ll stay put for at least five years, it would be better to buy a home.
- You are unsure of the stability of your job. If your job situation is iffy and you are living paycheck-to-paycheck, it is better to rent. Work on saving a downpayment and several months worth of payments in savings to ensure you can make payments on time and in full.
- Kids are in your plans in the near future. Wait to purchase the right home for your growing family and use the time now to save for your downpayment.
Buying a home is the best financial advice for those who want to retire early and build wealth.
For more information about David Bach, visit https://davidbach.com/.