Loan A

30 Year fixed rate loan at 6% interest rate >

$500,000 Purchase price
$100,000 20% Down payment
$400,000 Loan amount 
$2,398 Monthly principal & interest payment 

$863,280 Total loan repayment amount 

Loan B

30 Year fixed rate loan at 6.5% interest rate 

$500,000 Purchase price
$15,000   3% Down payment
$485,000 Loan amount
$234 PMI per month (est. 0.58% PMI rate)
$3,066 Monthly principal & interest payment  

$3,300 Monthly payment (principal, interest and PMI) 

• $31,128 Total PMI paid over 11.07 years   
• $240,480 Extra principal and interest payments over the life of the loan   

$1,134,888 Total loan repayment amount including principal, interest, and PMI Over the life of the loan

Loan B costs $271,608 more than Loan A. 

Investing the down payment savings

$100,000 Loan A down payment
$15,000 Loan B down payment 
= $85,000 savings  

However, if you invested that $85,000 gaining 7% every year, you’d earn $647,042 over the same period it takes you to pay off your mortgage. That’s an extra $375,434 in your retirement account. What could you do with $375,434 in retirement? A lot, probably.

So, you might be thinking that $85,000 is more money than you have right now to invest over 30 years; or you don’t have 30 years left to invest. That's okay. 1) You don't need $85,000 to have a good retirement 2) Invest what you have.

In either case, your goal should be to keep your total housing expense to 30% or less of your monthly gross income, whether you’re working or retired. Proper money management will allow you to live a stress free career and retirement, and avoid worrying about if you have enough at the end of the month.  

The key to retirement is to save as much as you can as early as you can and let what Albert Einstein called the 8th wonder of the world, compound interest, work its magic over time.  

If you’re young and don’t have $85,000 to invest right now, let’s look at some different loan scenarios. 

Loan D 

30 Year fixed rate loan at 6% interest rate  

$250,000 Purchase price
$50,000 20% Down payment
$200,000 Loan amount
$1,199 Monthly principal & interest payment 

$431,640 Total loan repayment amount 

Loan C 

30 Year fixed rate loan at 6.5% interest rate 

$250,000 Purchase price
$7,500  3% Down payment
$242,500 Loan amount
$117 PMI per month (est. 0.58% PMI rate)
$1,533 Monthly principal & interest payment  

$1,650 Total monthly payment (principal, interest and PMI)

• $15,564 Total PMI paid over 11.07 years  
• $120,240 Extra principal and interest payments over the life of the loan   

$567,444 Total loan repayment amount including principal, interest, and PMI Over the life of the loan.

Loan D costs $135,804 more than Loan C.

Investing the down payment savings

$50,000 Loan C down payment 
$7,500 Loan D down payment
= $42,500 savings  

However, if you invested that $42,500 gaining 7% every year, you’d earn $323,520 over the same period it takes you to pay off your mortgage. That’s an extra $187,716 in your retirement account. Over 40 years that’s $636,414 or an extra $500,610 in retirement savings.

What could you do with $187,716 in retirement? A lot, I bet. That's a trip to Paris, Costa Rica, Spain, or a nice boat or Longboat Key, Florida time share.

How Do I Get To $1,000,000?

Key retirement savings tip: Save as much as you can as early as you can. 

Everyone wants to one day retire comfortably, stress free, and financially stable as possible. The #1 regret of most retirees is that they didn’t plan well enough for retirement. In other words, they didn’t save as much as they should have as early as they should have. This key principle and work in your favor or against you if you embrace it or ignore it. But it’s not too late to save for retirement. To give you an idea of what it takes to retire with $1,000,000, take a look at the chart.

In an upcoming blog post, we’ll cover 8 detailed strategies to maximize your retirement. Some of these you might have heard before, some you might not. Regardless, learning one new strategy that you can employ could be the difference in up to 10% more saved for retirement.

Things That Can Kill Your Plans 

If your goal is to pay off your home before you retire, you should know some of the things that can set you back from doing that.  Refinancing Your Mortgage Sometimes refinancing makes sense; sometimes it doesn’t. Unfortunately, some couples divorce and whoever is keeping the house is forced to refinance the home in their name only in order to get the other person's name off the mortgage. These things are common and sometimes unavoidable. In this scenario it’s best to simply do whatever it takes to get the mortgage into the person’s name that’s keeping the house. You can deal with the consequences of this later in life.  

Unless you’re refinancing to lower the interest rate and pay the home off faster, you’ll put yourself further behind on paying your home off and making the mortgage work for your retirement. Many homeowners refinance when rates drop a full point. This is commonly called the rule of thumb when it comes to refinancing. However, this rule, while reasonably applied, is misunderstood and misapplied to many people’s retirement plans. If you do refinance into a lower rate, continue making the same monthly payment each month. This way you’ll pay the home off faster instead of restarting the clock at 30 years again.  

If you can afford it, refinancing to lower the rate and shorten the loan term (refinancing into a 15 year when you have 20 years left) is always the best thing to do.  

Pulling cash out of the equity in your home can really set you back. Not only does it add more debt to your mortgage, but it also resets the repayment schedule and now you’re starting all over again. Some people think that because they’re paying off a car or credit cards in the refinance and saving money overall each month, that it’s a good idea. While this might be so in the short term, the longer term risk is that you’ll run the credit cards up again or buy a newer car. This cycle of refinancing every 3–5 years or so to pay off unsecured debts will stop you from ever paying off your mortgage, and worse, carrying your mortgage into retirement.

Keep in mind that these are only strategies to pay off your mortgage as quickly as possible and maximize your return by investing the down payment difference to boost your retirement savings. But there are other options available to you as well, and some financial advisors actually recommend doing it, in certain situations. 

A Streamline Refinance in Nocatee, Ponte Vedra, Florida

Many Nocatee residents in Ponte Vedra, Florida use Bee for a streamline refinance that’s as easy as 1-2-3

1. Apply
2. Approve
3. Close

These types of refinances can include: 

• Lowering the rate
• Cashing out equity
• Paying off high interest rate credit card debt
• Shortening the term of the loan

To see if you qualify for a streamline refinance, contact Bee at 855-626-1999 or apply here today! 

If you’re ready to make the leap into homeownership, contact us today! Our dedicated loan experts will walk you through every step of the way ensuring you get a low rate and close quickly!

If you’re looking for a streamline refinance to lower the rate and payment, apply here today or call 855-626-1999 and speak with one of our expert loan officers in your area!