The Downside of Paying off Your Mortgage Early
For many homeowners, being able to pay off your mortgage early sounds like a great idea. It’s likely one of the costliest payments you have to make each month and the idea of being able to save on interest payments can surely be attractive. In some cases, it can have profoundly positive financial and psychological effects for the homeowner. However, there are some disadvantages when it comes to paying off your mortgage prematurely, so it is important to do your homework before making such an important decision.
Less Available Resources
Most homeowners have other financial goals, like paying for house remodels, a new car, college tuition, a daughter’s wedding, or a vacation or two. If your extra money goes to paying off your mortgage, it’ll make it a lot harder to save for such things. Even without these extra financial goals, there’s always an unfortunate chance that you will experience an unexpected emergency that could take a good chunk of change from your pockets and may even go beyond your savings. It’s much easier to pay off these emergency expenses if you’ve created a cash reserve to fall back on, so you may want to consider putting aside an extra cushion if you do decide to pay off your mortgage early.
Fewer Tax Breaks
Another disadvantage of paying off your mortgage early is a reduction in the tax breaks you’re able to receive. Although the mortgage interest tax deduction was reduced back in 2017, you can still deduct interest on up to $750,000 of mortgage debt if you itemize your taxes. If you began your mortgage prior to 2018, your limit is even higher, at $1 million. If you are a homeowner that does not currently itemize, your income is still likely to grow over time — offering you a chance for deduction in the future.
Fewer Investment Potentials
If you put part of your income into investments, you may not want to pay off your mortgage early. Depending on how you invest and how the market is doing, there’s a chance that you could make additional money that would surpass the amount you would have saved on interest payments from paying off your mortgage early.
Make the Right Call Regarding Your Mortgage
Butler Mortgage wants to be your Mortgage Advisor for life. We would be happy to discuss the merits of paying off your mortgage early. With over 25 years of experience, we’ve worked with buyers of all kinds and experience levels to help make the right financial decisions regarding homeownership. To discuss your financial options or find the mortgage that’s right for you, call 407-931-3800 today or fill out our free consultation form online.