Why You Shouldn't Pay Off Your Mortgage Early
Lots of people dream of making that final payment on their mortgage and owning their home free and clear, but is this really such a financially savvy thing to do? For years the only acceptable goal was to aim for paying down your mortgage, so naturally, when people hear that it may be better to let the mortgage run its course, suspicions abound. The following points can help to highlight why it may be better to keep your extra cash instead of throwing it all into getting rid of your mortgage debt.
Mortgage Loans are Cheap Loans
It is a fact that a mortgage loan is one of the cheapest, if not the cheapest loan the average person can qualify to get. It therefore makes sense to take advantage of that loan for the longest possible time. Chances are than if you start putting all your excess money into your mortgage you may need to take another consumer loan or education loan to finance your other needs. This means paying money into a low interest loan and then borrowing at a higher rate of interest.
Holding on to a Mortgage Keeps You Liquid
When you keep your money in the bank or in an investment account you retain the liquidity that cash has to offer. If on the other hand, you tend to put your excess cash directly into your mortgage you won’t have access to it if you need to get something done on short notice. You may even come across an investment with the potential for astronomical returns but you won’t be able to invest because your money is tied up in your house.
Mortgage Interest is Tax Deductible
Another reason to let your mortgage run its course is to take advantage of the tax savings. When you have a mortgage you can claim a deduction on your income tax return. What you do with your return is up to you, but you would not get it if your loan was fully paid off.
You May Qualify for Mortgage Interest Assistance
Some employers offer mortgage interest assistance as part of their incentive package, but of course you need to have a mortgage to qualify. At the start of every year you collect a statement of your estimated interest costs for the period and present this to your employer who then calculates your benefit based on the company’s policy and the amount.
While some people will always opt for the feeling of not owing the bank on the house, there are other factors to consider when deciding if to pay off your mortgage or not.
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