Is Paying off Your Mortgage a Good Idea?

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Filed under: Market Comentary

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With all of the financial responsibilities most people have, that elusive idea or dream of having financial freedom is something everyone continually thinks about.

The majority of homeowners know that their mortgage is a major factor that is preventing them from this so-called financial freedom.

And today, with more homeowners than ever refinancing or moving and having to sell or buy a home, the question whether you should pay off your mortgage is a critical decision for homeowners.

Paying off your mortgage definitely has its benefits! Financial expert Sandra Block says that doing so will give you “a lot more money, a lot more security when you retire. And, it’s a great feeling; it’s a great piece of mind.”

But before you decide if you should pay off your mortgage, there are some important aspects to consider.

Rob Russell of Forbes magazine recently came up with a “decision guide” to help homeowners decide if paying off your mortgage is in the best interest.

The first thing Russell suggests is if you have other debts besides your home, such as a car payment, credit card debt, or any other loans, it is in your best interest to pay these off first. Russell describes these debts as “unsecured” loans which carry higher interest rates than your home. Your home mortgage is what Russell calls “good debt” because it can help you establish better credit, while the other debts you have are “bad debt” and should be paid off first.

The second aspect Russell says you should look at is the “Real” interest rate on your home mortgage. He explains that the interest you pay on your mortgage is probably one of the few items you can deduct on your tax return every year, which actually lowers the true interest rate you are paying on your home loan.

Russell also asks the question if your home was paid off today, would you have enough savings to carry you to and through retirement? He says that a good rule to live by is that your investments and savings should be at least double the value of your home.

Finally, Russell says that a homeowner should make sure that the decision to pay off the mortgage is the right decision for you and don’t confuse a critical financial decision with an emotional feeling.

If you have any questions related to the mortgage industry, please feel free to call me and we can discuss all of your options and concerns.

Source: http://www.forbes.com/sites/robrussell/2014/07/10/should-you-payoff-your-mortgage/

Source: http://www.wusa9.com/story/news/local/2014/08/08/mortgage-retirement/13790639/

 

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