November 23, 2024

It can be tempting to pay off your mortgage early, especially if you have the funds readily available. You can retire debt-free, save on interest and even divert those savings to higher-earning investments.
But there are drawbacks to consider, too, and paying off your mortgage early isn’t the right move for everyone. If you’re looking to free up cash, a mortgage refinance may be a better option.
If you elect to go the payoff, route, however, there are a series of considerations you should first make. Here’s what to think about.
Pro: It frees up cash to invest or pay down debts
One big benefit to paying off your mortgage is that it frees up a lot of cash. You no longer have hefty monthly payments to make and, instead, can invest those funds in other — possibly higher-earning — investments. In the long run, this could mean more wealth.
Freeing up cash also allows you to pay off debts, which could be costing you a significant amount in interest — particularly if it’s credit card debt. According to the Federal Reserve, average credit card rates are currently above 15%.
If access to cash is the main reason for paying off your mortgage early, however, a refinance may be the smarter path.
Con: You lose a tax deduction
Homeownership comes with quite a few tax advantages. One of the biggest is the mortgage interest deduction, which allows you to write off the interest you pay toward your mortgage loan each year — as long as your balance is $750,000 or less.
When you pay off your mortgage, you forgo this valuable deduction, and it could increase your taxable income quite a bit.
A quick note: The mortgage interest deduction is only available if you itemize your returns. For many homeowners, taking the standard deduction (instead of itemizing) is more beneficial. The current standard deduction is $12,950 to $25,900, depending on your tax filing status.
Pro: You save money on long-term interest
Depending on your balance and how long you have left on your loan, paying it off early could save you significantly on interest costs.
Let’s take a look at an example: Say your original mortgage was a 30-year loan for $300,000 at a 5% rate. When you reach year 20 — with a balance of just under $152,000 — you come into a large inheritance and pay off the remaining loan balance entirely.
If you had gone forward on your original payment schedule, you would have paid nearly $280,000 in total interest. Paying it off 10 years earlier? Your interest costs would be just $238,328 — more than $40,000 less.
Use a mortgage calculator and crunch the numbers to determine exactly how much you would save.
Con: You may have to pay a prepayment penalty
Potential prepayment penalties are another drawback to consider. Some lenders charge fees if you pay off your loan too early, as it eats into their ability to make a profit.
These fees vary, but generally, it’s a small percentage of the outstanding loan balance. These penalties are typically only charged if you’re very early on in your loan term — usually within the first three to five years, according to the Consumer Financial Protection Bureau. Not all mortgage lenders charge prepayment penalties, though, so make sure to check with yours if you’re considering paying off your loan in full.
More pros and cons
There are other considerations, too. For one, it might give you peace of mind and reduce financial pressure — particularly if you’re heading into retirement. On the flip side, if you’re using all your funds to pay off the loan, it could deplete your emergency savings. This would put you in a bind should you lose your job or have a sudden change in finances.
If you’re not sure whether paying off your mortgage early is the right choice, consider talking to a financial advisor. They can help you determine the best path forward.
A cash-out refinance — which turns your home equity into cash — might also be an option, depending on your goals.
More Americans now smoke cannabis than cigarettes
Restaurant manager details impact of the water crisis in Jackson, Mississippi
Labor Day weekend travel tips
SYDNEY (Reuters) -Australia's housing market downturn is squeezing many home sellers into a double bind: They've taken out a mortgage for a new home but are holding out for a good deal on their old place, forcing them also to hold a bridging loan to cover their previous mortgage. And with prices now falling at their fastest pace in four decades, a sharp reversal from the 25% annual price rises seen just a year ago, the durations of those bridging loans are doubling or even quadrupling from their typical three-month span. This has been good news for many lenders in an otherwise shrinking mortgage market, where falling house prices and rising interest rates are driving away business, but it means more financial stress for borrowers still braving the market.
Homeowners have to pay £1,200 more than landlords for the same mortgage after banks increased their rates at a much faster pace.
Buying a house is a major milestone, but many Americans have been struggling to find affordable options — or any options — over the last two years. However, the supply of active home listings across the U.S. grew at a record rate in July. Now, the big question is whether this will help lower home […]
(Bloomberg) — Mortgage rates in the US climbed for a second week in a move that threatens to further cool the housing market. Most Read from BloombergLukoil Chairman Ravil Maganov Dies After Falling From Hospital WindowPutin Brings China and India to Russia for War Games Defying USJeremy Grantham Warns ‘Super Bubble’ in Stocks Has Yet to BurstUS Jobs Data Have Potential to Push Fed Toward Third Jumbo HikeThe average for a 30-year loan rose to 5.66%, the highest since the end of June, Freddie Ma
The U.S. 30-year fixed-rate mortgage averaged 5.66% as of Sept. 1, according to data released Thursday by Freddie Mac.
Burry highlighted the S&P 500's 18% decline from its December peak, and poked fun at the people who keep asking him when stocks will crash.
Bank of America is launching a mortgage option for first-time home buyers offering no down payments, no closing costs and no minimum credit score.
The housing market continues to weaken as mortgage applications decrease 3.7% from a week earlier, the Mortgage Bankers Association said on Wednesday.
My rent is $850/month that I split with my girlfriend, and I do not have a car payment or credit card debt. So that might mean that if you believe it will cost $500,000 to buy the home you want, you might want to want to put down at least 20% to avoid mortgage insurance, which means you’d need to save about $100,000 over and above your emergency fund.
Amid the alphabet soup of Medicare you may have heard of Medicare IRMAA, but aren’t sure if it impacts you. Here’s what you need to know: Medicare Part A is free, but there are monthly premiums for Medicare Parts B and D. Part B covers medical care and Part D is the prescription drug component of Medicare. The monthly premium for Part B and any monthly premium surcharge for Part D are determined based on your modified adjusted gross income or MAGI from two years prior to the current year.
Stocks' recent moves are similar to what happened in the Great Depression, in the early 1970s, and as tech stocks collapsed early this century, he says.
Even in a year when prices for just about everything are skyrocketing, the surging price of food stands out. In June, the federal government's food-at-home index — meaning food you buy at a grocery…
12,000 puts bought in a single purchase for $2.14M on 8/26 are now worth over $36M. Was this just a lucky guess, or did this institutional trader know about the BIG NEWS that was about to drop just days after their bearish purchase?
Ready to go bottom fishing again? Any good angler can tell you that there’s plenty of good eating just waiting at the bottom of the creek, or the pond, or the lake. The same concept also holds for stocks – investors can always find some quality equities down at the market bottoms. Stocks get down there for a multitude of reasons, and the reasons aren’t always related to any fundamental flaw in the company or its share trading policies. Sometimes, it’s some idiosyncratic business move, or over-re
Wells Fargo Senior Economist Mark Vitner said the nation’s housing market is faring even worse than recent headlines suggest, with the Bay Area and the West suffering the most. “There’s no question that the housing market has long lost momentum and continued to lose momentum in July,” Vitner told me Wednesday. “It’s worse than it looks,” Vitner said.
Question: My current brokerage account charges 1% and also has high-priced funds so I’m thinking of moving my money. In other words, don’t assume your funds cannot be directly transferred, and instead ask the brokerage what can and cannot be transferred.
(Bloomberg) — The Philippine peso tumbled to a record, boosting pressure on the central bank to raise interest rates more aggressively to stem the slide.Most Read from BloombergLukoil Chairman Ravil Maganov Dies After Falling From Hospital WindowPutin Brings China and India to Russia for War Games Defying USHong Kong Officials Target End to Hotel Quarantine in NovemberGlobal Bonds Tumble Into Their First Bear Market in a GenerationThe currency on Friday weakened beyond its previous all-time low
District of Columbia Attorney General Karl A. Racine said Wednesday that he’s suing Saylor for tax fraud as well as his company, MicroStrategy, for helping him.
The S&P 500 broke below 4,000 this week, for the first time since the end of July. It has investors wondering: Does this mark the low point of a roller coaster ride? Stocks rose all last year, fell from January to June, rallied from July to mid-August, and now are falling again. According to Wells Fargo strategist Paul Christopher, it’s evidence that the stock rally is sputtering to a halt. Christopher writes that “Cracks in financial market liquidity are appearing,” and says of the S&P 500, “3,
He isn't sure if they can have a future together.

source

About Author