A mortgage loan is a pretty hefty debt to have hanging over your head. Sometimes mortgages are used to buy that first home or to pay for remodelling, emergencies, or other situations where money is needed quickly.
The current mortgage crisis has many homeowners looking twice at the loan agreement which may reset at higher interest rates in the future and at rates that make foreclosure possible. This fact alone causes many home owners to consider paying off a mortgage early.
Now, there are several factors to consider before rushing off and to pay the mortgage in full. Of course, before you make any such adjustments you should first look over the loan agreements since many lenders place a penalty for those repaying a mortgage early. Should the penalty be too much you should definitely reconsider.
Time is another factor. The average life of a mortgage loan is about 25 to 30 years. Home owners with less then 10 years remaining on the mortgage are not benefiting from the tax reduction all that much and so paying the loan off will not be too detrimental. On the flip side, owners with more then 10 years left will feel a significant bite from the loss of the tax deduction.
You need to consider other priorities and other debts you may have accumulated. A mortgage is one of the cheapest loans available compared to other loans.
The interest rates on credit cards are probably racking up an astronomical amount of debt and home owners should place money towards that debt before the mortgage.
Another option instead of paying off that mortgage early is to simply save that money. Many households are reported to have absolutely no savings or emergency funds. This can cause severe economic stress on households should they encounter a crisis such as a sudden lay off or medical emergency.
Placing that money towards a saving fund may be wiser then placing it all towards the mortgage.
Also, if you find yourself without adequate insurance coverage such as medical insurance or life insurance you should consider these options. If you have children and a spouse that depends on your pay check a sudden death can be detrimental so a good life insurance policy is necessary.
If you plan to move out of your home and into a smaller accommodation paying off the mortgage is a great way to get out of the loan without hassle. For those that want to stay in the home for a long period and are capable of making those mortgage payments on time and with ease then paying off the loan is just not advisable.
A mortgage loan is a great way to save for the future but it can cause stress. So, if you are looking ahead and do not mind the debt then there is really no reason to pay the loan off right away.
Instead, put the money in savings or towards investing to prevent emergencies that may cause significant debt down the line.
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