Reasons You May Not Want to Pay Off Your Mortgage Early

by HOMZ Real Estate Group 10/27/2019

Deciding not to pay off ahead on your mortgage can be a decision made because you want to divert your cash to another investment. If you have an investment that is certain to yield interest or because you have a certain way you have planned your finances, paying the full mortgage earlier than due has no place on that list. 

Deciding to pay off or not to pay off early most times is an option because of inheritance proceeds, or life insurance proceeds. If you are in a fix about this decision, here are the reasons why you should not pay off your mortgage early.

Eliminates tax benefits

Owing on a mortgage with interest reduces your tax liability. Deciding to settle your mortgage payment will eliminate all tax deduction benefits. Taking advantage of these tax benefits as a borrower reduces your income on which tax is due and sometimes increases funds available for use.Higher return on investment If there is a guarantee that an investment will pay high interest, why would you want to tie down your money on a mortgage payment? Having other investments aside from your mortgage property is a smart decision to make, as multiple investments may yield more profit and, are a guaranteed way of having multiple streams of income.

For liquidity purposes

Some individuals always like access to cash at any time. For such people, the decision to pay off a mortgage early would only come after they have made all other payments including other investments. For people who value liquidity over an investment, it’s advisable to keep the mortgage as that might be a better option for giving them more cash on hand. 

You might have other debts

In this present generation, there is a lot of other debt to worry about aside from your mortgage. These other debts are some of which you incur from your daily living expenses and are more pressing to settle than your mortgage. Debts like your car loan typically have a higher interest rate than your mortgage and are not deductible from income tax. School loans, credit cards, home equity credit are all debts that should be paid off first before you consider early mortgage payment.

When you do not have an emergency fund

Having an emergency fund that can cover you for at least 12 months is crucial if you are considering paying off your mortgage. You do not want to put all your money on your property and later begin to ask for a home equity loan when unforeseen situations arise. 

Paying off your mortgage is a reasonable decision to make, but do not do it in such a way that leaves you financially crippled. 

Talk to your financial advisor about what works best in your situation for your financial future.

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HOMZ Real Estate Group

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