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Your home purchase and your retirement: The implications you should consider.

Three years ago, we purchased our house. Previously, we had bought a very cheap house that was perfect for law school, but the schools were terrible. Me, being a real estate attorney, could see the writing on the wall. I came home and told my husband, “We should move.” He said ok. We put our cheap house on the market and sold it within 48 hours with 3 cash offers on the table. (Thankfully, we sold to an investor, who allowed us to rent for two months while finding our forever home.)

We went under contract on a beautiful would-be brand new construction home. Well 48 hours before closing, the preferred lender of the builder tried to say we only qualified for an FHA loan. Doing what I do, I knew they were wrong. We walked. At the time, it sucked. But God had other better plans. We got our money back from the builder, after threat of a fraud lawsuit due to the lender being their preferred lender. 

Instead we bought in a neighborhood across the street from the new home and boy was it a good decision. Earlier this year, we got antsy. Our house is older and a lot of renovations will be coming up. It also doesn’t have the dream backyard that we would like. But its in a great location with great schools. We started looking for a new house. And we found one. But I couldn’t quite quell that inkling of doubt in my mind. So I sat down and looked at the figures:

Current house: Purchase Price $195,000. Worth: $265000. 20 year mortgage at 3.375: Approx. interest paid over life of the loan: $58,000. $80 extra payment monthly has this loan scheduled to be paid off in 16 years. 

New house: Purchase Price: 365000 Down Payment: 90,000. 30 year mortgage at 4: Approx. 210000 in interest and wouldn’t be paid off for 30 years.

Once I looked at the figures, it became a no brainer. We aren’t moving. Before our kids even graduate for high school, our home will be paid in full. Even without earning a penny on the investment, this alone allows us to save $150,000 for retirement. Plus the payments for 14 years: Approx $13,000 a year:  $182,000. Right there we have over $300K for retirement, simply by living within our means. 

Sure, we talk to the mortgage people and they will tell us how much we can afford. Yes, we can. But this is the exact problem with an American culture. It’s something we fight everyday. I deserve this fancy house. I work my butt off. But that 300K puts me a lot closer to that goal of retiring at 55 than living in a beautiful house will. 

Now, not everywhere in the country will have this option due to cost of living, but if you speak to most if not all financial experts, they all say 15 year mortgages. Can you imagine how much less you need to live on if you don’t have to pay a mortgage or rent?

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