Oakland County MORTGAGE PAYOFF: Five For & Three Against

Oakland County MORTGAGE PAYOFF: Five For & Three Against

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Oakland County MORTGAGE PAYOFF: Five For & Three Against                                                             Oakland County MORTGAGE PAYOFF: Five For & Three Against

Do you dream of the day when you mail your last mortgage payment in Oakland County to your lender? Do you wish for a day when you are mortgage-free?
Well, your dreams might be misplaced.

Paying off that loan early—if you have the extra dollars—seems to make sense, especially if you have other plans for your money. Yes, you absolutely should make your mortgage payments on time each month with the goal of one day eliminating these payments entirely. But paying off your mortgage loan early? That might not make the most financial sense, even if you have the funds available to pay off your 30-year or 15-year mortgage loan before it reaches the natural end of its life.

Here are three reasons why paying off your Oakland County home loan months or years early might not be the right move for you.

You have high credit-card debt: Mortgage debt has a key advantage over other forms of debt: low interest rates. The same can’t be said of credit-card debt, which can come with sky-high interest rates. It’s not unusual for consumers to have credit-card debt that comes with interest rates of 15-20% or higher. If you are burdened with high levels of credit-card debt, it makes more financial sense to pay off your credit cards before you use your extra money to pay off your mortgage loan early. Take any extra dollars to pay down the debt that comes with the highest interest rates.

You need that tax deduction: Having a mortgage loan comes in handy at tax time, when you can deduct the interest that you paid on your mortgage throughout the previous year. The IRS allows you to deduct the interest paid on up to $1 million worth of mortgage debt, and you can take this deduction for both a primary residence and a second home. You can also deduct the interest on up to $100,000 worth of home-equity loans. This holds true even if you didn’t use your home-equity loan to make any home improvements. If you pay off your mortgage loan early, this tax advantage will disappear. This can be a painful out-of-pocket experience, especially if you work as an independent contractor or on a freelance basis. That mortgage-interest tax deduction can help soften the blow come income-tax time.

You need to save for retirement: If you’re not contributing the maximum to your retirement plans, it makes sense to take the money you might use to pay off your mortgage loan early and instead boost your retirement savings. People are living longer today. They need, then, to save more money to ensure a retirement that isn’t ruined by financial stress. Unfortunately, financial surveys show that a majority of people approaching retirement have not saved enough for their after-work years. You can avoid this trap. Consider paying off your mortgage loan early only if you are already contributing the maximum amount of dollars to your IRA or 401(k) plan.

Here are five reasons why paying off your Oakland County home loan months or years early might be the right move for you.

Paying Off Your Mortgage Faster

Paying off your mortgage is one of the biggest financial goals of most homeowners, and retiring debt-free can certainly give your golden years a greater sense of financial freedom and stability. Whether you’re nearing retirement age or are just looking to reduce your largest debt load more quickly, here are some great tips for paying off your mortgage faster!

Principal Versus Interest

Essentially, to pay off your mortgage you have to reduce the principal owing on your property. There are really two ways you can do this without dramatically reducing your monthly budget.

Increase Your Monthly Payments

Even increasing your monthly payments by a small amount can take years off the life of your mortgage. You can also choose an accelerated plan whereby you can make weekly or biweekly payments rather than monthly. This will allow you to make a few extra payments each year. Combining these efforts can really have a surprising effect on the principal of your mortgage over a short period of time. There are a number of free online calculators that can help you figure out the exact numbers for your particular situation.

Reduce Your Interest Rate

If increasing your monthly payments is not an option, you can still pay off your mortgage faster by refinancing your mortgage to negotiate a lower rate. Keep your eye on the financial markets to gauge the best time to make this move, and seek out the advice of a REALTOR® or financial advisor to confirm that this is a viable option for your current financial situation. If you have a good history of payment and an excellent credit score, finding a lender shouldn’t be a problem.

Make A Lump Sum Payment On Your Mortgage

Another way you can decrease your mortgage principal and pay off your mortgage faster is by making a large lump sum payment. If you have come into extra money, have received a large income tax return, or just have a considerable amount of savings, this may be a wise financial decision. It will also dramatically decrease the amount of interest you will pay over the life of your mortgage and thus save you money. Just be sure your mortgage does not include a clause that will penalize you, and then determine whether it is still a good choice before going ahead.

The satisfaction a homeowner feels when they make that last mortgage payment is really unmatched by any other financial achievement, and following these simple steps can more quickly make that dream a reality.

 

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Tom Gilliam
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tom@homes2moveyou.com
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