Good Reasons to Pay Off Your Mortgage
- Wednesday, March 20, 2013
You want to be mortgage-free to increase your choices in retirement. If you retire with a mortgage and then fall behind on your payments on your fixed income, you’ll lose it and be forced to move.
Without a mortgage, you have complete control over where you live. You can downsize or move as soon as you feel that it’s best for you, or choose to stay in your current home for the rest of your life.
Where you live can play a big role in your retirement expenses, so having the choice to stay or go gives you additional control over your finances.
Aggressively paying down your mortgage will help you build equity more quickly. You’ll be able to avoid paying for private mortgage insurance sooner because you will build equity in your home faster.
It could also mean being eligible for the best rates offered by the marketplace by being under the conforming loan limit.
You may be able to take advantage of lower rates whenever lenders are offering more competitive terms by refinancing your existing mortgage.
Because historically real estate is a hard asset that appreciates in value, paying it down rapidly creates forced savings. The appreciation also acts as a return on investment.
Making the decision to have a debt-free retirement means you will have to save more to gradually get there. This not only helps you pay less interest, but it also motivates you to cut down on wasteful spending over the years.
For many people, the added savings they are able to accumulate more than makes up for the interest they could get by investing the extra payments.
Reduce risk, improve options
Taking less risk means fewer chances that things can go wrong. Even if you are an investing guru all your life, everybody’s mental and physical abilities decline with age.
You may be able to make more in the stock market than paying off your mortgage now, but this may not be true forever. Unfortunately, many people don’t realize the decline until the damage is irreversible.
Retiring your mortgage when you retire is a prudent choice because by so doing, you are limiting the chances of a catastrophe.
Safety net of last resort
A fully paid for home gives you another option that you should guard jealously: a reverse mortgage.
Having access to the equity in your home without having to leave your home or even make monthly payments, could be the difference between a joyful and peaceful end of life and a season of misery for both you and your family members. It may not, however, be as simple and glamorous as the late-night TV celebrity pitchmen make it sound.
A reverse mortgage, while often advisable, can be very expensive. The fees and high rates of interest often escape the attention of seniors. The numbers can be staggering. This is why you want to make sure you keep that option as your safety net of last resort—not a means to get you a pile cash the day you turn 62.
Just keep in mind that to get a reverse mortgage you cannot have an existing mortgage, which becomes yet another reason you need to get busy paying off your mortgage. And, so you can send out those party invitations.
Got a match, anyone?
This article appeared originally in the Debt-Proof Living Newsletter in February 2013.
"Debt-Proof Living" was founded in 1992 by Mary Hunt. What began as a newsletter to encourage and empower people to break free from the bondage of consumer debt has grown into a huge community of ordinary people who have achieved remarkable success in their quest to effectively manage their money and stay out of debt. Today, "The Cheapskate Monthly" is read by close to 100,000 Cheapskates. Click here to subscribe.
Publication date: March 20, 2013
Recently on Debt
Have something to say about this article? Leave your comment via Facebook below!
Listen to Your Favorite Pastors
Add Crosswalk.com content to your siteBrowse available content