What it Means to Pay off a Mortgage Early
It might be the dream of many American homeowners to completely pay off their mortgage and own their home outright. Not only would this idea provide a ton of peace of mind, but it can also help to dramatically shift one’s overhead into a position that’s more comfortable. So why wouldn’t an Animas Valley homeowner want to pay off their mortgage ahead of time? The reasons both for and against can vary, as we explain below.
How Early Payment Can Help
Not having a monthly mortgage bill is perhaps one of the top reasons for a homeowner to pay off their mortgage ahead of time, as this creates more monthly cash flow and more flexibility for those who are retired. But surprisingly there are other, less obvious, benefits to paying it early.
Think about what paying off the home mortgage means in the grand scheme of the rest of your life and the lives of any heirs. If you leave your home to your children or grandchildren, it’s less of a burden if it’s paid for. Sometimes heirs find they end up selling a home that’s left to them if it can’t be paid for.
Using a paid-off home to leverage a reverse mortgage can also work in certain situations. The complexities vary based on the situation, but having a paid-for property increases the amount that homeowners are able to borrow through this type of loan.
As a fallback option, many homeowners have seen that owning their property outright allows their home to be protected from a lawsuit or from a bankruptcy filing. While this isn’t always the best result, it’s comforting to know there is some permanence in owning the home. Bankruptcy laws concerning home equity vary from state to state, so be sure to read up on what applies in your area.
Reasons To Keep Chipping Away At The Balance
It might sound counterintuitive to choose to keep paying a bill month after month, but maintaining a mortgage payment can actually benefit some individuals. Depending on a home’s property taxes and interest rate, it might actually be a benefit for your taxes to keep paying toward your mortgage, as these dollar amounts can be deducted.
Retired individuals might also benefit from paying a mortgage that includes setting money aside for property taxes. Those who live on a fixed income with Social Security or retirement benefits might not have the resources available to handle an annual tax bill of several thousand dollars, and find that it’s easier to have a predictable monthly payment.
Lastly, if paying off a mortgage early would require taking out a personal loan or even withdrawing from a 401k account, it might not be the best idea. Interest rates on these types of loans are typically higher and aren’t always worth the downsides they might bring.
Only You Can Decide What’s Best
Remember that homeowners should evaluate all points and carefully consider if paying off their mortgage early will work for them. If peace of mind and a burden free gift is on their mind, it might be a smart move. However, if an individual needs the tax benefits and wants to keep their expenses the same each month, it could benefit them to continue to pay during the life of the loan. In most cases though, the joy of owning a home free and clear is enough motivation to make the leap and pay it off.