How to Pay Off Her Loan in 12 Years
QUESTION: I am a never-married single female, 53 years old, and would like to retire at age 65 in the year 2002. My objective is to have the roof over my head paid for.
In 1981, I purchased a condominium for $44,900 with a 5% down payment. I signed a note financing $42,600 at 10.75% (fixed) for 30 years. The balance today is $39,000 and my payments are $402 a month and the mortgage will be paid off in July 2011.
I live on a fixed income which, last year, was $29,000. I have other assets, put the maximum allowed by law into an IRA plus I save $100 a month in a regular savings account which has a balance of $8,000.
In a few months I will receive about $7,000 to $8,000 from a retirement plan from my employer and plan to roll that over into an IRA.
What advice can you give me regarding having the home paid for in 2002? Should I refinance to a 15-year term? Apply extra money to the principal and to the IRAs? Or apply an additional amount to the principal each month?
ANSWER: I wouldn’t refinance if I were you and lock myself into higher payments that, at some time in the future, might be a little binding. Nor would I dabble with the IRA you are contributing into because of the tax-deferment aspect of it.
According to my calculations it will take about another $93-a-month additional payment to your mortgage principal to pay your mortgage off in about 12 years.
That, of course, will eat up the $100-a-month that you’re putting in your savings account, but since you have a balance there of about $8,000 for an emergency cushion it seems like the most practical diversion of funds open to you.
What’s “smart” about borrowing $60,000 for a home and over the next 30 years paying the lender $137,591 in interest alone (at 10.5%)? By painlessly accelerating the payoff of your mortgage you can save thousands in interest and cut many years off that awesome 30-year indebtedness.
Our leaflet, “Free and Clear: Getting the Mortgage Monkey Off Your Back” explains all. Send a long, stamped, self-addressed envelope and $2 to cover costs to Don Campbell, P.O. Box 80260, Phoenix, Ariz. 85060.
Campbell, a retired Times staff writer, now is a Phoenix-based free-lance writer.
