Is Paying Off Your Mortgage a Good Idea?
Most homeowners have thought about what it would be like to pay off their mortgage early. It’s worth some consideration for sure. There are benefits and potential consequences involved.
Let’s look at the reasons, both for and against, early payoff of your property.
Benefits of Paying Off Your Mortgage
Money Saved: You can save literally thousands of dollars in interest over the life of your loan.
Reduced Stress: You won’t to worry about making a house payment, so you can work less, and chill more.
Increased Cash Flow: You’ll have hundreds of dollars to spend, save or invest each month.
Prepared for Retirement: Retirement planning and living well on a reduced income will be so much easier without house payments.
Increased Confidence with Money: It feels good to know that you are making good decisions that will impact the quality of life for you and your family.
Why You Might Not Want To Pay Off Your Mortgage
Sometimes you can still come out ahead without paying off your mortgage early; here’s how:
Invest the amount you would use for the payoff: With mortgage rates being so low now, you might be paying only 3 or 4% on your mortgage. Yet you might find an investment that pays you a 10% return. So, you would make more money if you used your extra funds to make a higher rate of interest from an investment rather than pay down your mortgage.
Pay down other forms of debt first: Paying off loans and revolving debt with higher interest rates first makes more sense. Mortgage ‘usually’ have a lower interest rate, so you’ll save money by paying off a higher interest debt before your mortgage.
Keeping your dollars in hand may be wiser. Using all of your cash to pay off your house means you have substantially fewer liquid dollars. You’d have to sell or refinance your house to get your cash back in case of an emergency.
Paying off your mortgage has both pros and cons. Consider this list and then speak with a financial professional to determine the best course of action.