Dave Ramsey’s Baby Step 6 is a huge baby step milestone to cross as the cost of purchasing a home ranks among the biggest sources of debt for people. Can you imagine a life where you’ve completed home payment? The peace of mind and joy that accompanies it is mind-blowing.
What Dave Ramsey thinks about paying off your home early?
There’s a constant back-and-forth between personal finance experts on whether it’s good to pay off debt earlier than the scheduled time or not. One finance guru that has made his opinion known on this is Dave Ramsey. And as most people know, Dave is averse to debt. He also believes that it should be paid off as early as possible. As a matter of fact, he recommends that people should only opt for 15-year mortgages that won’t require that they use over 25% of their income for monthly debt payments. Dave believes that once your mortgage is cleared, you can then invest the remaining amount in investment portfolios that can help you reach your goals.
It’s also worthy of note that Dave believes in first paying off a non-mortgage loan, building an emergency fund, and investing about 15% of your take-home pay before making any extra debt payment.
Dave believes that the efficacy of this method lies with the psychological benefit of clearing off your mortgage debt, and not paying any debt whatsoever. He also expresses his opinion that doing this lowers stress and risks.
Does Dave Ramsey Approve of Mortgages
In Dave Ramsey’s article titled “the truth about mortgages”, Dave approves applying for mortgages. However, he believes that it should be an option of last resort and that borrowers should only opt for short-term loans. He explained that there are always needs to make extra payments, and emergency expenses are a constant aspect of life.
Dave believes that the most ideal way to purchase a house is to make full cash payments for the entire building.
Why Does Dave Ramsey Love Churchill Mortgage?
Dave is an unequivocal advocate of Churchill mortgage, and some of this can be traced to his connection with the mortgage. Dave noted that the company takes an unusual approach when dealing with mortgage debt. Its main aim is to help you quit mortgage, and accept its “debt-free homeownership” option.
Dave explains that Churchill Mortgage has clearly communicated that its mission is to help clients own home without debt.
This business is one that started as an idea on the Dave Ramsey show, before growing to a noteworthy company that ranks among the best in providing homes for Americans.
What are the Ways to Pay off Your Home Early?
As a result of Dave Ramsey’s debt-free policy, he suggests policies that help to bring its audience into that expectation. As such, he suggests numerous ways to help clear off mortgage debt early.
Here are some ways Dave Ramsey suggests.
1. Refinance
A great way to clear off your debt early is by refinancing and opting for a much shorter term—Dave recommends a 15-year mortgage. There’s no doubt that you’ll be required to pay more for a 15-year mortgage, but if you can afford to make payments, then go for it.
To handle a much bigger payment, you may look at boosting your income or reducing your cost of living, it’s definitely an option that’s worth it.
You have an option of refinancing your long term loan to a 15-year loan. And if you’re already enjoying a very low-interest rate, then you can save some money by treating your 30-year term loan like a 15-year loan. And what if it’s already a 15-year mortgage? Then treat it like a 10-year mortgage.
2. Make Extra Payments
You can use Dave Ramsey’s mortgage payoff calculator to show the effect of any extra payment you choose to make. Assuming you have a 30-year term, $220,000 loan that comes with an interest rate of %4, making a simple extra payment of ($1,050) quarterly will help you save $65,000.
However, prior to making payments, it’s best to first check out the mortgage company you’re using. Also, try to accomplish the goal yourself as more creditors have programs they claim are designed for that but it’ll only end up fleecing you of your hard-earned cash.
3. Downsize
Dave Ramsey recommends that a very drastic, but highly effective way to pay off your home early is through downsizing your home. With this method, you’ll have to sell your much bigger house and purchase a much cheaper home. Doing this gives you enough liquidity to offset part or all mortgage owed.
He reiterated that it’s imperative for homeowners to first have an idea of how much they can afford to pay before making another purchase. He also noted that it’s best to first consult a professional before purchasing a home. For this, he recommends finding a reputable real estate agent that’s within its Endorsed Local Providers network. He claims that its ELP agents are well-trained in identifying the needs of customers and suggesting homes that appropriately fit their finance.
Is it Always Best to Pay off Your Home Early?
Dave Ramsey believes that there’s no such thing as good debt. As such, he believes that you should get rid of every type and kind of debt as soon as you can. He noted that the more cash you have, the better.