With the Federal Reserve keeping interest rates at or near zero, you may wonder about your mortgage. Is it a good time to refinance or even pay off the debt entirely? After all, your mortgage is one of the biggest expenses you may have in life, does it make sense to get rid of that debt as soon as possible?
It’s a question worth exploring. There are many reasons why keeping your mortgage could be a better option than paying it off. Yes, you may eliminate one of the largest bills you have every month, but here are three points to consider. Like any decision you make, it’s important to go over the pros and cons.
1. Losing earning potential on your investments. Using funds from your investments to pay off your mortgage early may mean you lose out on potential gains. However, by keeping your portfolio untouched, you increase the chances of a return on your investment.
2. Not having funds available for other debt. Your mortgage likely has the lowest interest rate of all your debt. If you are paying down debt, consider paying off your other consumer debts or student loans with higher interest rates before paying off your mortgage.
3. Losing your tax deductions. Mortgage interest can be taken as a tax deduction. With no mortgage there is no interest to deduct. This potentially means your taxes could be higher.
If you are considering paying off your mortgage or another large debt, let’s talk. You may be able to leverage your investments to help meet your long-term goals. Like every big financial decision, you want to understand how it will affect the “big picture”.