By: Bill and Cindi Porter, AILERON INVESTMENT ADVISORS
Q: Should I pay off my mortgage early or should I invest that money elsewhere?
A: The answer to your question depends on your personal circumstances. There are many items to consider when deciding on paying off your mortgage early; we will cover some of those items. We recommend speaking with your Financial Planner who knows your personal circumstances to help with this important decision.
Interest Rates: If you can earn a higher rate of return than your mortgage interest rate, you would be better to invest and not pay off the mortgage early. The dilemma here is that we are not always able to predict our future earnings. Paying off the mortgage, you are “earning” the interest you would have paid over the life of the loan.
Taxes: Mortgage interest may be tax deductible. For high income earners this may be a significant advantage. However, we suggest reviewing the tax savings versus the interest cost.
Liquidity: Before you consider paying off your mortgage, make sure you have enough cash reserves to cover your expenses. In addition, you need reserves for any unexpected emergencies or opportunities.
How long do you plan to live in your home: If you plan to sell at some point down the road you run the risk of home values falling, as they did in 2008. It took many years for the values to come back, some markets took significantly longer than others. While we think of Real Estate as an appreciating asset, it is not always the case. There is no guarantee that you will receive all of your money if you must sell at some point.
Peace of Mind: For some, knowing that they (not the bank) own their home is important. You cannot put a value on peace of mind.
As with any important financial decision, we strongly suggest speaking with a trusted advisor to help in deciding what would be best suited for you and your circumstances.
This is for education only. Before using this information in any way discuss it with a financial professional. There are many risks associated with stock trading. You may lose some or all of your financial investment. Securities offered through Dempsey Lord Smith, LLC Member FINRA/SIPC. Securities offered through Integrated Financial Planning Member FINRA/SIPC. Advisory services offered through Dempsey Lord Smith, LLC.
All the information in this letter is published in good faith and for general information purposes only. We do not make any warranties about the completeness, reliability and accuracy of this information. Any action you take upon the information is strictly at your own risk.
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