FIND OUT THE Benefits of Paying Off Your MortgagE EARLY

If you’re paying a mortgage then you’ve likely thought at some stage or another about what life would be like to pay it off. You’ve probably dreamed about living the life you desire, unfettered by the constraints of having to pay your loan payment every month. However, you should be cautious before you make a decision. Take a close look at your financial options to determine if it really would be wise to pay off your loan early. In some situations, it’s better not to pay it off. Consider these reasons, for and against an early payoff, as it applies to your situation.                                

1. You’ll save on interest

   Depending on where you are in the term of the loan, you stand to save thousands of dollars that you would have been paid in interest over the life of your loan.

2. You won’t have the monthly stress of a house payment

   This can be a great relief! If you save even half this amount regularly you will be able to achieve personal and financial goals.

3. As retirement approaches, paying your house off means you won’t have to struggle

   The last thing that anyone would want is to struggle with house payments on a reduced income.

4. You’ll have hundreds of dollars to spend or save monthly

   It’s great to know you can take a couple more trips a year or concentrate on saving for goals that you’ve put money aside for.

5. Your confidence about your financial situation will increase

   If you pay off your mortgage early you’re clearly doing something right with your budget. Continue your good work.

Why You Might Not Want To Pay Off Your Mortgage

Taking all of the above into account, sometimes you can still come out ahead without paying off your mortgage early. Here are some reasons why:

1. Paying interest has its advantages

   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 off your mortgage. Bear in mind that if you’re getting an income tax deduction on your mortgage interest, that interest is costing you even less overall.

2. Keeping dollars in hand

   Paying off your mortgage in one lump sum might not work in your best interest. This doesn’t necessarily increase your net worth because you’ll have less cash. Paying all your cash into your house means you have substantially fewer liquid dollars. You’d have to sell or refinance your house to get your cash back if you need it. This can cause difficulties if the funds are urgently required. It is therefore unwise to use all your cash to pay off your mortgage, especially if you could be earning interest on it instead.

3. Avoid withdrawing cash to pay off your house

   This practice can incur an extra penalty. Plus, all the money that you take out is taxed at your ordinary income rate.

4. Paying off loans with higher interest rates first makes more sense

   It’s smarter to pay off a higher interest debt than your mortgage, if your mortgage has a lower interest rate.

Answering the question of whether to pay off your mortgage early does take some deliberation. It helps to know the pros and cons involved. It is vital that you take into account your situation. Strive to determine how you can make the most money, be prepared to engage professionals for advice, and you’ll most likely be happy with your choice. Remember, this is a guide and if you are in doubt about paying off your mortgage you can seek independent legal and financial advice.

If you are interested in reviewing your mortgage, Local Property Team is more than happy to guide you towards the options suitable for you. We can provide you with a complimentary real estate report outlining the key statistics about the local market. We are also happy to share help you achieve optimal real estate results.  Our state-of-the-art office is conveniently located near the Edgecliff Drive entrance to Sanctuary Cove at 2/9 John Lund Drive, Hope Island, 4212.