In a rare glimpse of what goes in the minds of the world’s billionaires and top political figures, President Trump recently paid off his mortgage worth $1.2 million securing his Palm Beach, Florida mansion near his Mar-a-Lago estate.
Paying off one’s mortgage is not an issue confronting the usual homeowner, after all. Some opt to repay their home loan earlier than scheduled as what the President did, while some look for options to get back on track with their home loan payments.
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The Presidential Mortgage
The President paid off his $1.2 million purchase loan on his Palm Beach property that he took out in 1994 from Merrill Lynch Credit Corporation, The Chicago Tribune reported, citing public records.
UK-based Daily Mail obtained a copy of a satisfaction of mortgage filed with Palm Beach County by Merrill Lynch, dated June 15, 2017.
The loan is on the property at 1094 S. Ocean Blvd, Palm Beach FL 33480 whose various listings online described it as a single-family home with five bedrooms and four bathrooms.
The property is currently valued at $11.3 million per Daily Mail, up by almost seven fold from its sales price of $1.6 million back in 1993, based on Trulia’s listing on the property.
As for the mortgage itself, Tribune reported it as an adjustable-rate loan with an initial rate of 4.75%. Instead of waiting for it to fully mature in 2019, the President opted to pay off the loan by making the final payment last June.
Paying Off Your Mortgage Early
That when you pay back your mortgage ahead of its term, you generally save on interest costs that could have accrued when you have waited for the loan to run its full course.
You do this by making extra payments to your principal, not your interest. The loan gets paid faster that way.
By moving your savings toward your loan, you might lose out on the exponential growth of your money when you invest it or leverage it, as what could have been expected of the President who is a seasoned investor.
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Nevertheless, there’s no easy, textbook answer to this dilemma and one can start looking at his/her priorities.
If you’re all for savings in the short-term, you can opt to retire your mortgage early. If you’re thinking long-term, you can put your extra cash toward your retirement savings.
Just make sure you don’t have to contend with prepayment penalties. Even when you do decide to keep your mortgage, you can take advantage of tax deductions on your mortgage interest.
Being Behind on Mortgage Payments?
But not every homeowner has the choice of fully paying their home loans earlier. Others are unfortunately struggling with their loans and have fallen behind their monthly payments.
The first and foremost action is to contact your loan servicer, let them know you are having problems with your mortgage.
Your loan servicer might or might not offer you these alternatives to help you to remain on top of your debt.
Forbearance is when your lender puts your mortgage in a standstill so it remains current. Once this forbearance period is over, you’ll be asked to make up for the payments via lump sum or installments. If you are facing short-term financial distress, this is an option.
Repayment is when your lender allows you to shell out monthly payments to make up for the late ones. The adjusted payment is your usual mortgage due plus an extra amount. This is ideal if you have bounced back from the financial distress and can afford the adjusted payment.
Loan modification is when your lender changes your loan term or payment to something you can afford. The process is almost akin to a refinance but there should be proof that you are undergoing financial hardship. This can steer you out of foreclosure.
Aside from talking with your loan servicer, you can also seek the advice of a HUD housing counselor.
Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade.