We all know Kevin O’Leary as one of the main investors on the popular TV show Shark Tank. He is regarded as a financial expert, and he recently posted a video on CNBC sharing some helpful tips for individuals who want to pay off mortgage debt early or are dealing with other forms of debt.
Of course, his first very simple bit of advice is “don’t get in it.” He’s half-joking with this comment, but it’s true. If you can take steps to avoid living beyond your means and getting into deep debt in the first place, you’ll have less to worry about. Student loan debt is understandable, and so is mortgage debt obviously. You want an education and you want to buy a home.
“Those are the two big ones,” says O’Leary. “You want to pay off that student loan, and you want to get stuck in too big of a mortgage because you have to pay that one off, too. Pay those off as fast as you can, and your savings will start.”
Better Spending Habits
Where you can obviously have better habits is in your spending. Frivolous credit card use will lead to massive credit card debt with very high interest rates. Buying or leasing a car beyond your means is also a good way to build up unnecessary debt. When you develop and stick with conservative spending habits, you will be able to minimize—or avoid—certain unnecessary debts.
Many of us are already in debt, however, so now the issue becomes how to get out of it. O’Leary suggest paying off the debts with the highest interest rates first. That would typically be credit cards. Beyond that, you want to take any steps you can to pay off your student loan or mortgage debts as soon as you can.
Paying Off Your Mortgage
O’Leary’s best piece of advice is focused on paying off your mortgage. He says to look for loans that “don’t have huge penalties to pay them off. Very often you can get a mortgage that after a year, you can start paying off the principal on an accelerated basis.”
O’Leary also notes that the new tax laws as part of the Tax Cuts and Jobs Act allow for fewer homeowner deductions in an effort to get more people claiming the higher standard deductions. This is another reason to try and minimize your mortgage debt.
Explore Your Mortgage Options
I definitely agree with these assessments. When shopping for a mortgage, it’s important to look at loan options with no pre-payment penalties and favorable interest rate schedules. You also want to try not to overextend yourself buy buying more than you can afford right now. You never know exactly what the future has in store. The ideal situation is that you ultimately make more income than you do now and you can start putting that extra money toward your mortgage principal.
Contributing to some savings and retirement plans such as a 401(k) is also wise. Most financial experts recommend keeping an “emergency” savings fund that will allow you to get by for 3-12 months in case something happens. It’s not easy to do this and pay off your mortgage (or other debts) at the same time. It takes discipline (and some careful planning) to make sure every extra penny is going to good use.
If you are currently in an unfavorable mortgage situation with high interest rates, pre-payment penalties or other hindrances, the best advice I have is to look at refinancing. You may even consider shortening the length of the loan depending on your financial situation. For example, moving from a 30-year loan to a 15-year loan. Or, you may also look at home equity cash-out refinancing options that might allow you to pull out money to pay off other high-interest loans while also refinancing your home loan under better terms.
It’s definitely worth exploring your options to see if there is a better mortgage loan out there for you that will allow you to get out of debt sooner.
Call us at Transparent Mortgage today at (619) 488-0899 or email me at firstname.lastname@example.org to set up a no-obligation mortgage consultation. Let us help you find the ideal mortgage that’s right for you.