Often, banks, credit unions, and brokers focus on the “mature” homeowner. That homeowner that is married with children. They are talking about upgrading their home for a bigger size. Paying college tuition for their children. Buying a retirement property. However, what about you — the 30 and under homeowner?
Under 30 Mortgage Techniques #1
FACT: you have the best of all worlds. For one, you are building a portfolio faster than any other generation. You are experiencing historically low-interest rates, which allows you to become more aggressive in your financial approach. So, what are goals you can accomplish?
Let’s review some of our Under 30 Mortgage Hacks:
- Retirement. Yes, we understand retirement is many years off. However, consider this illustration. It is called the theory of compounding interest. Get the details here. That is the clinical definition. Here is a simple one:
Rule of 72: Whichever number you divide into the number of 72, will be the time it will take for your money to double. 12% or 72 divided by 12% equals 6. That means at an average interest rate of 12%, your money doubles every 6 years.
This is such a powerful concept to commit to. You will make your years of 45 to 60 stress free. Imagine, if you refinance your mortgage in one year’s time, you save $5,000. At the end of the first year, you invest that $5,000. Let’s also say you are 28 years old. At the age of 68, you have saved $1,200,000.00! Off of a one-time investment of $5,000.
If you refinance your mortgage, that allows you to begin to save your money for retirement or the long term. That is smart money!
Under 30 Mortgage Techniques #2: Let’s stick with the theme of retirement. If you are a W-2 employee, in many cases you are missing out on free money. YES, you heard that right! Free money, in two ways:
- In your 401K if you contribute to your retirement, that money is not taxed. What does that mean? The government lets you have free money in the form of fewer taxes.
- Company match. On the surface, you may think the company will match my contribution up to 6%. That is 6% for free, in addition to the tax money! That is a huge amount of money over the course of your life.
Then, if you can refinance your home to free up monthly cash flow to make yourself money, you are going to be light years ahead of other homeowners.
Under 30 Mortgage Techniques #3
Speaking of making money, you have heard the expression “work smart, not hard.” What that really means is that smart people put their money to use. This is the perfect time to think about becoming a real estate investor.
Anytime there are dramatic changes in the economy, inevitably there are changes in the housing market. No matter how favorable times are, the opportunity to buy and sell a property is there. They say it takes money to make money. Now, you have the money!
Additionally, don’t settle on just a single source of income or a single property. You can get a cash-out refinance that will allow you to purchase a rental property.
So: Smart money makes money. Becoming a landlord does two amazing things to your bottom line: You are taking the monthly cash flow and reinvesting and your building equity into yet another property.
Smart money for 30 and under homeowners opens you to a world of options in cash and asset accumulation you never thought possible. However, you were smart enough to become a homeowner, now be smart enough to use your home as a financial tool.