There are two sides to the argument as to whether or not one should pay off their home loan early. Some strongly support the idea of paying off mortgage loans as soon as possible, while others are really against this idea. So whose argument is correct and what are the justifications?
Before making a wise decision, it is worth weighing its pros and cons. Below are some of the strong justifications shared by those who are against the idea of paying off mortgage loans early,
has. The ‘interest charged’ on the mortgage loan is subject to tax deduction in the year it is paid. In addition, a large part of the mortgage payments of the first years constitute interest. A homeowner would effectively reduce their cost of borrowing through this tax reduction subsidy. However, this benefit would be lost if the mortgage is paid off early.
b. Some financial consultants argue that it’s wise to keep your monthly mortgage payments regular and invest the extra money elsewhere that may be holding back a higher return, rather than pouring it into the home loan to reduce principal. There may be some good short-term investment program from a financial institution, or it may be the model for a business you want to start.
cons You would be missing out on great investment opportunities and investment earnings through mutual funds or through retirement accounts like 401(k) and others, if you were going to “lock up” all the money for the mortgage payment only and not in none of these mutual funds. long-term investment funds or programs.
d. Also, it makes a lot of sense to keep some extra money in liquid form, rather than investing it all in the mortgage payment schedule. You won’t be in a good “liquidity” position until the entire mortgage loan is paid off and your house is sold. Keeping the money in liquid form would be the best way and it is also very beneficial especially if you need to access the money quickly. in time of emergency.
me. With the rate of inflation increasing each year, the $1,000 you paid today as your monthly mortgage payment could be worth only $800 ten years from now when you adjust for inflation. Based on this theory and logic, it seems logical to “use” the additional money for other uses that appear to be more beneficial than putting it into the mortgage plan.
Therefore, whether or not you should pay off your mortgage early is a choice you should make after crucial considerations and a thorough evaluation of your current personal financial situation and your long-term goals.