Should I Pay Off My Mortgage
Most households have finite income. When you have a limited amount of money coming in each paycheck, it can be very easy to have conflicting financial goals, such as:Asking yourself, I pay off my mortgage? not sure what the right answer is? You not alone. For many, it a difficult choice to make because the “right” answer is different for everyone. Decisions are extremely individualized to your specific financial situation. Let’s talk about what might influence this decision for you and your family.
One quick note: There are two common ways of paying off your mortgage early.
Paying everything in one lump sum like after receiving a windfallPutting extra payments toward your mortgage. (Many homeowners pay half their mortgage payment biweekly, which essentially creates one extra payment per year.)
These considerations apply no matter your strategy.
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5 pros to paying your mortgage off early
It could be in your best interest to pay off your mortgage early, especially if you’re longing for stability and peace of mind. Not everyone wants mortgage debt! Here are five pros to paying your mortgage off early.
1. No more monthly payment
When your house is paid off, a monthly payment disappears from your budget, lowering your household expenses dramatically. With lower expenses, your overall passive income needed to cover your monthly expenses would also be lower. This means you could achieve financial independence quicker! The money going toward the mortgage now could go toward investing into something else later.
2. Peace of mind
Everyone has an individual perspective on debt. Some believe in “good debt,” such as student loans or owning real estate. Others might avoid debt altogether.
Your relationship with money is your own. For those that want to own their home outright instead of owing a bank paying off a mortgage can lessen anxiety. When you own your home, you and your family’s life will be less affected if circumstances change like losing a job, needing to care for a loved one, etc.
The house is paid off now what? You can always put a HELOC on the property if you want access to the cash. Sure, you would be charged an interest rate against your line of credit, but you aren charged if you aren using it. With the HELOC, you could pay and hold a property while it is being renovated and refinanced. There are funds you could tap into if you really needed. But you don have any active debt against your property.
This isn’t a recommendation to work hard paying off your house then immediately put a bunch of debt against it. However, you can now use the asset of your house smartly and conservatively for short term periods to invest in a deal, buy a new rental, or build your investment portfolio another way.
4. Past experience
A person’s relationship with money is greatly influenced by past experiences. Previous bankruptcies, job loss, income opportunities, and sicknesses play a role in what financial decisions a person makes in the present day.
For some, having a mortgage payment is too big a risk. They would rather pay their mortgage off early in case a future job loss decreases their income. For others looking to apple watch hermes double tour replica
the future, they might fear leaving behind a mortgage for their family members if they died suddenly.
5. The personal choice of having little to no debt
This connects back to No. 2, but it’s worth repeating: Some people simply don’t want to have a large debt like a mortgage, and that’s okay!
Cons to paying off your mortgage early (and why you might invest instead)
Before asking for a payoff quote, consider the negatives, too. Here are three reasons why someone would invest rather than ridding themselves of debt.
1. Your money could earn a higher return
One main argument that you should pay off your mortgage early is to minimize how much interest you pay. If you take longer to pay your mortgage, you’ll pay more interest to the lender.
But what if your investments earn a higher return than your interest rate? Not only could you cover interest with your investments but you could be turning a profit too.