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    Here Is Why You Shouldn’t Pay Off Your Mortgage Early

    loanYou think you’re doing the responsible thing by making extra payments towards the principle of your mortgage in an effort to pay it off early.  Paying it off could save you substantially in the way of interest. However, is it really in your best interest?  Here are a few reasons why paying off your mortgage early may not be in your favor.

    No more tax break

    As a homeowner you are eligible for a tax deduction from both federal and state on your mortgage interest. By continuing to pay on your mortgage it allows you the ability to continue to receive the deduction throughout the duration of it.

    Pay off debt with higher interest rates

    Mortgage interest rates have been near record lows for a while now. With such low mortgage interest rates, if you have other outstanding debt it probably comes with a higher rate than that of your mortgage. Focus on paying down debt with higher interest rates first, such as credit cards. This will save you more money in the long run.

    Where is the security blanket?

    If your plan to pay down your mortgage involves you taking funds out of saving or tapping into your retirement, be cautious. While this may allow you to pay off your mortgage early, does it leave you without a security blanket? Unforeseen expenses could arise at any time such as medical bills or home repairs that could cause financial damage. It is important to maintain a security blanket of funds that would sustain your living expenses for a minimum of 6 months.  If you had planned to use your retirement funds to pay towards your mortgage be prepared to pay taxes on it if it was not previously taxed.

    Return on investment

    Make your money work for you. By putting extra funds toward your mortgage are you restricting it from being investable? Your return on investment could be higher elsewhere. Before paying off your mortgage early consider if it is providing you with a higher financial gain than what else is out there.

    If you have an emergency fund that is equal to 6 months of your income and you are putting the max into your 401K and will not be dipping into either to pay off your mortgage early, then it may be in your best interest to pay your mortgage off early.

    The Ferzoco Group is experienced in working with buyers and sellers from Ocean City to Cape May. If you are looking to sell or buy a home let us know how we can help.  Our job is to make your tomorrow better than today. Contact us today via email or give us a call at 609-264-6762.


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