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Why Not to Pay Off Your Mortgage Early

Posted by  on Feb 08, 2010
 
Thinking about paying off your mortgage earlier? There are many obvious benefits of paying off your mortgage earlier. There are some issues you might want to think about prior to any decisions such as paying your mortgage note off.

Some of these might include:

You will lose any tax savings your currently receive on the interest paid each month. If you are near the end of the life of the mortgage, this might be nominal due to the fact that the majority of your payments go towards paying the principal and less towards paying the interest.

You could use that same money and put it into something which offers a higher return over time, like 401(k) contributions which would be more valuable than the savings you receive by paying off your mortgage earlier.

The money you might use to pay off the mortgage earlier can be used to pay higher interest items, such as credit cards or a car loan, which will save you incrementally over a short period of time.

By paying off your mortgage early you essentially tie up your money in your home. While this may give you a good bit of peace of mind which may be priceless you would now be forced to sell your home or refinance (hence starting the mortgage process all over again) in order to get cash if an emergency should arise.

Paying off your mortgage early does not necessarily maximize savings growth, it only lessens your long-term financial debt obligations. If you have a good interest rate on a fixed loan, you may want to consider hanging on to this and using your money elsewhere. Just something to consider.

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