If you own your own home, there's no doubt that you're looking forward to the last time your have to pay your mortgage payment. Once you fully own the home, you can use the money you were using to fund your mortgage payments for things you’ve always wanted to do. Paying off your mortgage early is a great goal, but it isn’t the right money move for everyone. Here are five scenarios wherein paying down your mortgage faster makes sound financial sense.
1. Your Current Home is Your Forever Home
If you plan on occupying the home you're living in now for the long haul
, paying down your mortgage early can end up saving you tens of thousands of dollars in interest payments.
2. You Don’t Have a Lot of Revolving Debt
For those who don’t tend to carry credit card balances, paying more towards your mortgage could be a smart way to use your resources.
If you do
carry credit card balances from month to month, you should consider using any extra money to pay down these debts before
you put any extra money toward your mortgage. Because of higher interest rates, credit card debt that lingers from month to month can quickly end up costing you a substantial amount in interest alone. Excessive credit card debt
can also damage your credit. It is best to handle credit card debt before trying to pay your mortgage off early.
3. You Inherit a Lot of Money
If you gain a lot of money because you are the beneficiary of an estate or you get a financial windfall through other means, using that money to pay down a big part of your mortgage can be a great idea. In doing this, you will not reduce your monthly mortgage payments, but you will shorten the life of the loan, which will save you a decent amount of money on interest.
4. You Want to Rent Out Your Home
This one depends on a lot of factors surrounding your specific property, like how much income it actually brings in. The interest you pay on your mortgage on rental properties can be a tax write off in New Jersey. Keeping your mortgage is a good way of reducing your taxable income.
On the other hand, if you would be ineligible for a tax benefit, owning your rental can allow you to pocket all the income you make from monthly rental payments.
5. You Are Ready to be Debt Free
The average American holds over $130,000 in debt. Mortgages, student loans
, medical debt, credit cards, auto loans, and other debts can add up. If you are ready to get that number down to ZERO and your mortgage is next on your list, go for it!
If you have a lot of other debt with higher interest rates or if you do not plan on staying in the home you’re in for more than a few years, paying off your mortgage early might not be a good goal for you. If you are struggling with your debts, Veitengruber Law
can offer solutions to get you in a better financial situation. No matter where you are starting, living debt free is possible