Should I prepay my mortgage?
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Whether you’ve recently gotten a good raise at the job, have been promoted at the plant, or the kids have finally flown the coop, you may have some extra cash burning a hole in your shoe box every month. And now you’re contemplating paying down your mortgage early… but maybe its better to invest that extra cash someplace else instead.The truth is, for the most part, long-term growth type investments such as stocks and small ventures have provided higher returns than the cost of mortgage money- at least these days. In fact, the U. S. stock market has provided an annual rate of return close to 10 percent over the last two centuries!
A qualified financial advisor should be able to help you figure the reasonably expected rate-of-return for different investments. Compare the expected investment rate-of-return to your current mortgage interest rate, and this should tell you whether an accelerated pay-off of your mortgage is financially smart.
Conversely, if you’re sitting on tons of equity in your home, you may also want to consider other investment opportunities.
Call us at or visit us at Nationwide Mortgage Rate for a free and complete equity analysis of your property.
Your home is going to appreciate or depreciate with or without a loan on it. You have to consider that tying up money in your home makes the investment not liquid, and therefore added risk that you need to consider as with any investment. Safety, Liquidity, and Return on Investment are all factors when considering paying down your mortgage.
Many homeowners have the mindset that they want to pay their mortgage off as quickly as possible and not have that large monthly payment and have more flexibility with their money each month. This can be both good and bad depending on your exact financial situation. While a good financial advisor can show you how you can make your home and the equity in your home work best for you, some consumers still would prefer to simply pay off their homes and be mortgage free. If you fit this bill and want to learn how to pay off your home loan quicker give us a call and we can go over several different options from refinancing down to a lower term mortgage, taking a little extra cash out of the equity in your home to consolidating debt, invest, or save for a "rainy day", lowering the rate and term on your mortgage, or any combination of these items.
Prior to prepaying your mortgage, it is a good idea to retire all other debts. You may want to look at what other investments would make better sense. Are you making your maximum 401k contributions? Do you have an IRA set up?