Should You Pay Down Your Mortgage?
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Homeownership is considered a “safe” long-term investment, which is part of the reason many people aspire to purchase a home in the first place. Mortgages allow people to achieve their goal of homeownership much sooner than if they had to save the entire amount upfront. For some homeowners, once they achieve the goal of purchasing a home, their next goal is to pay it off as soon as they can. But, should they?
Why you should consider paying off your mortgage early:
There are numerous reasons to pay off your mortgage before your amortization period is up. If you own your home free and clear, you may feel more secure, especially when there are changes in the market or economy. And, without payments to make, you can apply the money to other investments and savings goals. Additionally, if you pay your mortgage off early, you’ll save on the potential interest you’d have to pay had you paid it off in the time allowed. Many people initially borrow more than $200,000 to purchase a home so paying it off before it’s due in full is a huge accomplishment!
Why you should reconsider paying it off early:
Before you get ahead of yourself and begin throwing your entire savings at your mortgage, there are perfectly good reasons you may want to hang on to it. First, your home isn’t an income-producing asset. That is, once you pay it off, that’s it. It’s not working for you to generate a passive income every month. Although you may have more money in your pocket because you don’t have to make the payment anymore, it’s also not generating any additional income for you. Secondly, since you can write off a portion of your mortgage interest on your taxes, you’ll lose this tax advantage when you pay it off.
Thinking of paying off your mortgage early, but aren’t sure where to start? Listen to episode #124 of “It’s a Good Life” to learn seven strategies to help you pay off your mortgage much sooner. Click here to listen.
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