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May 10, 2013
Debt-FreeThinking of paying off your mortgage over the next 30 years of your life can seem like a debt that is owed for an eternity. Indeed, 30 years is likely the lengthiest debt you will ever take on as a responsible adult.

While paying off any long-term debt early can always be considered a benefit, there are some very convincing arguments against making mortgage payoff your first priority. Here are the top four reasons to postpone making early payments on your mortgage:

You Have Credit Card Debt

The interest rate on your mortgage is bound to be lower than your credit cards, even if you haven’t taken advantage of the incredibly low rates currently being offered. Before you send another dollar to your mortgage company paying off your long-term debt, pay off your credit card balances.

Focus on paying off extra debt in order of highest interest to lowest interest. This usually means credit cards first, then car payments and private student loans, and then finally mortgage. Remember, you get to write-off your mortgage interest. Try writing off the interest on your credit cards and see what happens. Trust us, it won’t be good.

Your Rainy Day Fund Isn’t Ready for Bad Weather

You may not be growing as much interest in your savings account as you would be saving in interest payments, but having at least a three month supply (if not six) of cash reserves should be your goal before you start paying off your mortgage early.

If you loose your job or a major repair on your home presents itself, you can’t withdraw the extra mortgage payments you made to cover your expenses and if you’re unemployed, it will be difficult to get a home equity loan from your bank.

You’re Not Maxing Out Your Retirement Benefits

If you are not maxing out your retirement benefits, consider doing that first before you start making extra payments on your mortgage. You’ll be taking advantage of compounding by putting more money to work for you sooner, and of course the benefit of an employer match is key to maxing out your company benefits with tax free income.

Your Dollars Could Be Improving Your Life Elsewhere

If there are certifications or additional schooling that you believe would enhance your career prospects, invest in yourself before you start making extra payments on your mortgage.  The long term impact it could have on your happiness, career and of course income should not be understated.

With all that said, if you are in a strong financial position to do so and all of the above criteria are met, paying off your mortgage early will save you thousands of dollars over the life of the loan and will help you build equity more quickly when you go to sell.

If you’re planning to purchaserefinance, or learn more about mortgage rates, simply fill out our Fast Response form or give us a call at 888-644-1999.  Our experienced mortgage professionals would love to sit down and discuss your needs. We look forward to hearing from you!

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