6 Reasons Not to Pay Off Your Mortgage
Who wouldn’t want to live in a paid-for home? It sounds like a dream come true, right? So, if you face the opportunity to pay off your mortgage early, it could be tempting to do exactly that. But surprisingly, this isn’t always the best strategy! Consider these six reasons to divert that cash elsewhere.?
All debts are not the same. In general, we look at debt in a negative light. But since mortgage rates are typically fixed and very low, it’s not the worst type of debt to hold. In fact, it’s probably the best, especially when compared with things like credit cards or student loans.?
Mortgages provide a tax break. The interest you pay on a mortgage may be deductible on your income tax return and can save you quite a bit. This is especially true for those in a higher income tax bracket. Other forms of interest, like credit card interest, are not tax deductible.?
You can earn interest elsewhere. In many cases, it is possible to invest money in vehicles that earn far more interest than what you’d save by paying off a mortgage.?
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You’re probably carrying other forms of debt. Credit cards, car loans, student loans, and other types of debt typically carry a much higher interest rate than a mortgage. If you experience a windfall of cash, these are the debts to address first.?
Inflation might offset the interest on your mortgage. If the inflation rate exceeds the interest rate on your mortgage, your debt is technically considered an asset. Yes, that sounds strange, but it’s true.?
You might need those funds elsewhere. It’s always good to have liquid assets in the bank to cover an emergency. If you pay off your mortgage, do you have cash left over to cover a new roof, expensive car repairs, or other emergencies life throws your way? If not, you might be forced to borrow money at a higher interest rate.?
If you’re trying to decide what to do with a windfall of cash, make an appointment with me to discuss your options. This is a huge opportunity for growth and paying off your mortgage is often not the best idea. Let’s discuss all of your options so that you can maximize the potential of this moment.?