Can You Repay Mortgage Early?
Many people have in thought about repaying their mortgage early. They have been thinking
about making extra payments every month of they should just pay it all off at once. Everyone is
looking forward to having their mortgage finished off early and when they no longer have to
write checks every month. While others are thinking about paying off their mortgage early, some
are worrying about their other bills and expenses and whether or not it should go to just their
mortgage. So which one is better? Have a look at some of the considerations made in deciding
to pay early or not.
1. Do you know how much you’ll be saving on your mortgage? Well, for some people, it’s
not a lot because of low interest rates that can be deducted from your taxes. A 25% tax
bracket with a 4% mortgage rate will give you an after tax rate of 3%. If you think that
your rate is still high, then why not give refinancing a try? This will help you determine
how long it would take to recover any costs you will pay in a refinance. But even with a
high interest rate or unhealthy credit score report, you still have to check your savings for
other options that are available.
2. If you don’t have enough savings for emergency purposes, then you might want to think
twice in paying down that mortgage of your. It is best to keep 3-12 months worth of
expense money in your savings account. Some people think that paying their mortgage
early will minimize their need for emergency money because they can borrow from their
home equity, the problem is, your home equity can go down easily anytime. And even if
you have a lot of home equity, your mortgage company has the ability to cancel your line
of credit any time and they usually do that when you really direly need the money. Your
home equity is good for home improvement and college funding, but don’t ever use it as
your emergency fund.
3. Take advantage of your retirements account before making your mortgage payments. If
you don’t, you won’t be getting that free money that you can get just by asking. Even so,
you’ll be better off contributing to your retirement plan because of the tax benefits and
the high returns on your investments. A study has been conducted and it is said the 38%
of households are paying of their mortgage while their retirement plan contributions are
losing the benefits up to 17%. The benefit would be smaller but it would be more
applicable to invest in stocks in taxable accounts because their long term returns are up
Take your time in deciding what to do to avoid neglecting other important matters. Consider the
things mentioned above and don’t put your finances at risk. Manage your finances wisely and
you’ll finish off your mortgage in no time.
Are you a student and worried about your finances? Follow the tips on saving money and start
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