As you near retirement or plan your long term goals many people include paying off their home loan on their to do list. Well there are some valid reasons not to pay off your home loan.
1) Mortgage interest may be deductible so the effective rate may be less than is actually stated
2) The equity in your house doesn’t grow. The value of your house may appreciate however the equity in your house does not appreciate.
3) A Mortgage is generally cheap money. Since the loan is secured by your house the loan interest rates are cheaper than most other types of loans.
4) If you don’t get into the refinancing habit then the loan payment you pay today on a fixed loan will be cheaper on a relative basis in the future due to the effect of inflation on your earning power.
5) Once the bank has your money as you pay down the loan, it becomes more difficult to get that money back out of the house through future loans if you were to lose your job or you need the equity in your retirement years.
6)If you invest your extra payments into a “safer” investment vehicle then that money is accessible should you need it in the future in case of an emergency, additional spending money, another home purchase or for long term care needs.
Call us and we can help develop your retirement plan today to make the most out of your investments in the future.