Pros and Cons to Paying Your Mortgage Off Early
Paying off a mortgage is a dream for many homeowners. If you have the funds to do so, it seems like it would always be the right decision. The fact is that making this decision isn’t always the right choice. The pro’s and con’s are outlined below to help you make a more informed decision.
Financial Freedom – The one major pro of paying off your mortgage is the financial freedom that comes with it. A mortgage payment is often times the most expensive bill a homeowner will have.
In addition to refinancing, paying off a mortgage is a way for homeowners to free up monthly income. A mortgage is also debt and for many homeowners being debt-free is a goal and something to look forward too.
Investments – After paying off a mortgage, many people choose to take the money they would normally save for their payment and instead, invest it. Depending on the current rates, this may be a good way to invest for the future. A financial or retirement planner are good resources to utilize when making these decisions.
Retirement Income – During the retirement stage, paying off a mortgage can be a good way to reduce the amount of income withdrawn from a 401K or retirement savings plan thereby freeing it up for other activities or payments.
Loss of Tax Deductions – Many homeowners look forward to the mortgage interest tax deduction come tax season. Paying off your mortgage will eliminate that.
Reduces Savings – In order to pay off a mortgage you need the assets to do so. If you use your entire savings to pay off your mortgage than that money is no longer available to save for things like retirement or college tuition.
Talking with a professional about how much you would need to live comfortably after retirement, will help you get a better idea of how much you should be investing rather than using to pay off a mortgage.
If lowering your mortgage payment and increasing monthly income is a goal, eliminating your PMI payment is another good option. Realtor Bill Gassett with Maximum Exposure Real Estate discusses PMI and different strategies homeowners can use to eliminate it from a mortgage payment.
Another possibility to consider is if a jumbo loan could be a wise alternative, of which Luke Skar of Inlanta Mortgage-Madison talks about in depth in his article.
- Keep the Mortgage or Pay Off the House – Bankrate.com
- 5 Alternatives to Paying Off a Mortgage Early – cashmoneylife
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