The Secret to Retiring Early (and It's Smaller Than You Think!)
Are you dreaming of trading in your workdays for sun-drenched beaches or pursuing a lifelong passion? Early retirement might seem like a distant mirage, but what if I told you the key could be hiding under your roof – specifically, in your mortgage payment? Buckle up because I'm about to reveal a small change with significant results: paying off just 1/6th to 1/5th extra on your variable rate mortgage could shave years off your loan and accelerate your path to freedom.
Here's how it works:
Imagine you have a 30-year, $450,000 variable rate mortgage at 6.2%. Your monthly payment would be around $2756. Consider increasing that payment by just $459(1/6th) or $551 (1/5th). Yes, it seems small, but the magic lies in compound interest:
Scenario 1: Extra $459/month: You could pay off your mortgage nine years early, saving over $190,959 in interest! If you’re 30 By 51, your house is paid off, freeing up $3215 each month you can direct towards retirement savings or that dream lifestyle.
Scenario 2: Extra $551/month: You could retire ten years early, saving a staggering $213,046 interest! Imagine yourself at 50, house payment-free and ready to embark on your next adventure.
But isn't it risky with a variable rate? While rates can fluctuate, historical trends show they generally remain stable over the long term. Even with rate increases, the extra principal payments significantly outweigh the interest accrual, making it a worthwhile strategy.
It's not just about the numbers:
Besides financial freedom, consider the benefits:
Reduced stress: No more looming mortgage payments!
Increased flexibility: Pursue side hustles, travel more, or volunteer without financial constraints.
Improved mental well-being: Stress less about money and enjoy life more.
Ready to make it happen?
Talk to your lender: Discuss increasing your monthly payment and ensure there are no prepayment penalties.
Automate the extra amount: Set up automatic transfers to avoid temptation and stay consistent.
Track your progress: Monitor your payoff date shrinking to stay motivated.
Remember, every small step counts. Start with paying off 1/6th extra; as your income grows, consider bumping it up to 1/5th. Soon, you'll be surprised how quickly your path to early retirement materializes. So, ditch the "secret," unlock the power of tiny changes, and start paving your way to a future filled with freedom and fulfilment!