Paying mortgage faster not a good idea

31st August: You may consider paying off your mortgage faster but experts say it is not the best thing in present times.

With interest rates touching all new lows, many might be hooked by the idea of paying off mortgage faster. But you need to take a pause and think over it again before hurrying on to replacing your current mortgage of, let us say, 30-years with a new mortgage of 15-years.

 To pre-pay your mortgage or not?—Paying off one’s mortgage faster does seem a great option in the current times with interest rates diving down. But the question is Pre payment of mortgagewhether it’s advisable to do so.

  • Invest your extra funds—So, financial experts suggest that you should opt for investing your extra funds. Go for investing the money you want to pay monthly for faster clearing of your mortgage (loan). Put this money into high yielding investments like funds, stocks etc. You can also fund any of the college savings schemes for your kids if you happen to be living in a state with income tax. It would save you from local and state income tax botherations.
  •  Mortgage debt offers greater financial flexibility—According to a senior financial analyst, Greg McBride, you must not consider the option of paying your mortgage earlier because there are no benefits of doing so. That’s because a low rate of interest on mortgage can help in investing your savings in much better ways financially. You have the option of either making savings for your retirement or choosing to pay down credit cards with higher rate of interest.
  • Mortgages—good debt—You may be oblivious of the difference between bad debt and good debt. Mortgages are considered to be good debt while credit cards are generally deemed to be bad debt. Why? Because value of purchases made using a credit card generally depreciates over a period of time while prices of real estate witness appreciation.
  • Mortgage interest is tax deductible—Yet another advantage of mortgages is that interest on mortgage is tax deductible. In case of credit cards, rate of interest is generally quite high and it does not have the benefit of being tax deductible.

However, before making any choice as to whether to pay off your mortgage earlier or not, it’s best to consult your personal tax and financial advisor for best decision financially(not emotionally).

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