Advice On Paying Off Your Mortgage

by SuzyQ

posted on 10/06/2009

Most Americans seek to get rid of their mortgage and own their home outright. From the time they sign on the dotted line, taking on an extraordinary amount of debt in order to own the American dream of a home, they look forward to thirty-years down the road when they no longer have to shell out a mortgage payment. But as good as it may feel to own your home free and clear, it does not always make financial sense to pay off your mortgage early … or at all. Many financial advisors tell their clients that they should carry a big, fat mortgage … for as long as possible. Here are the reasons why.

Your mortgage doesn't affect the value of your home. The value of your home will fall or rise on its own, so it doesn't matter if you have a mortgage or not. Paying off your mortgage will have all of your money invested in the walls of your house, leaving it unavailable for growth in other investments.

Mortgages are cheap compared to other forms of borrowing. Look at what you pay for your MasterCard or Visa charge card and compare it to your mortgage rate. It's much more advantageous to pay your mortgage than pay a charge card bill.

Mortgage interest in tax deductible. Mortgage loans are the only ones that you can deduct on your income taxes, so it makes sense to keep your mortgage for as long as possible.

Mortgage payments get easier to pay as time goes on. Thanks to inflation, your current mortgage will seem like a bargain in ten years when a comparable home with a new mortgage is likely to be 25 or 30 percent more.

Individuals who pay off their mortgage early may have the peace of mind they require, knowing that they no longer have a large monthly payment. But it will often leave them cash-poor, meaning that in case of emergencies, they won't have access to immediately funds. In these uncertain, economic times, it is no longer easy to refinance the house or pull out some of the home equity without careful, advance planning.

Of course, everyone needs to make their own decisions based on their comfort levels and economic situations. If individuals or families have liquid cash that they can get their hands on in case of emergencies and at least six to eight months of living expenses, then paying off the mortgage early might make sense for them. However, most individuals would be best served by taking the extra money that would go toward a mortgage and invest it in a diversified portfolio of stocks, bonds, CDs, money market funds and mutual funds.

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