Q&A Should I prepay my mortgage?

This question comes up all the time. When the new tax law was introduced in 2017 and mortgage interest deduction went away for the majority of people, I started getting this question even more often. While I don’t want to say yes or no, I am glad to look at pros and cons of prepaying your mortgage. First, let’s talk about pros. You will get rid of your mortgage sooner and lower your expenses. The cost of buying your house will be lower since you won’t have to pay all that interest. Let’s take a look at cons. If you have a fixed rate of 4% for the next 30 years, you should ask yourself if replacing that debt with the equity in your house will be the best investment. The equity in your house is “dead money” until you sell the house. In many cases, you cannot even refinance or take an equity loan against it as banks demand sufficient income to let you do it. Having a mortgage adds some asset protection to your portfolio against creditors and predators. It is hard to sue you for the house that has a lien by a bank against it. If the value of your house becomes lower than a mortgage you carry, you may walk away from it and send the keys to the bank. It is hard to walk away from a fully paid house since you still have to pay property taxes and those are harder to get rid of. So, as I mentioned before, I will not tell you what to do, but you can decide for yourself what makes sense to you and what does not. Please let me know if you have any questions or share your comments. You can schedule a free consultation with me by calendly.com/michaelpecherskycfa