Food & Drink
FinanceIs Paying off Your Home a Healthy Decision?
Should you pay off your home early? This is a question that always seems to come up in personal finance debates. The answer to the question depends on your personal financial goals.
Pros
I personally don’t want to work a full-time job until I am of retirement age. My goal is to reduce any and all of my financial burdens as quickly as possible. I want to simply feel more secure by owning my home free and clear. Also, without a mortgage payment I will have more money to invest in my retirement savings thus allowing it to grow more quickly.
Cons
Many will argue the tax benefits of home ownership. Home mortgage interest is deductible on your income taxes if you itemize. By paying off your mortgage early you will lose the interest deduction.
Another con is that by paying extra on your home you will lose some of the opportunity to invest that money and build up your retirement nest egg. By using your resources to pay off your mortgage, you’ll have less money to devote to growing your investments.
If the interest rate on your loan is reasonably low, you may be able to earn more by investing that money.
Considerations
Paying off your home is probably best dealt with on a case-by-case basis. You need to take your own situation into consideration before you mount an attack against your mortgage. If you have more expensive debt obligations you should probably tackle those loans first. In addition, you always want to have an emergency fund established before you start paying extra on your home.
When you pay extra on your home that money isn’t as liquid – with the exception of a home equity loan. My personal plan is to keep my money liquid and earning a great yield in my ING Orange Savings Account and once I have the necessary funds I pay it off.
If you have the means, I recommend paying off your home mortgage. I certainly plan on paying off my home soon as soon as I am able; in fact it is a major goal of mine. As Dave Ramsey is fond of saying “the paid off home mortgage has replaced the BMW as the status symbol of choice”. Amen to that.
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September 28th, 2006 at 11:18 am
You’ve got some big-time sense, baby. Wiping out the mortgage and investing that dough is gonna buy you a one-way ticket to Richville. Dave’s plan makes a lot of sense and I’m proud of you for deep-sixing your debt. Way to go!