Generally speaking, outright home ownership is a financial strategy that offers several sweet rewards. If you’ve ever debated whether you should pay down your mortgage debt early, read on for a few fantastic reasons why it’s a good idea.
Topping the list for most folks is achieving peace of mind. Your monthly budget won’t be burdened with a loan payment and if ever your life circumstances take a turn for the worst, you’ll have the most basic necessity covered.
Another obvious reason to zero your mortgage balance in less than time than your loan term is to spare your finances of the steep costs associated with your mortgage. Even at today’s historically low rates, interest is a staggering proportion of many loan balances.
Making additional mortgage payments reduces both the interest and principal balance. Less and less interest will be due and more of your payment will be applied toward your principal. For example, a 30-year $300,000 loan at 4.65% APR results in $257,000 of interest - nearly double the cost of the home!
Simply put, paying off your mortgage early transfers the money you would have paid the bank to your pocket. In most cases, it makes sense to pay off your mortgage before you retire. New costs - like medical expenses - can seriously tax your fixed income retirement budget. Smart retirement planning is about accumulating assets and reducing spending. Eliminating your monthly mortgage can significantly increase your retirement cash flow.
The potential downside of diverting money toward paying off your mortgage early can mean less in your investment accounts and the tax-deductible nature of mortgage interest makes it preferable to other types of debt.
Yet, when you consider the positive financial impacts, combined with peace of mind, you’ll likely agree being mortgage free is the way to go! If you’re need of a reputable financial pro to help keep you on track, give me a call – I have a great referral!
The LizLuke Team provides comprehensive transaction management - we handle matters that matter and the small stuff, too. Connect with us today to chat about your real estate journey. Learn more and contact us at lizluke.com.
