Should You Pay Off Your Mortgage Early? 5 Questions To Help
I don't know about you, but I could really live the high life if I didn't
have to pay my mortgage. Imagine thousands of dollars each month to do with
what you please. That would be heavenly - or would it? Like most financial
decisions, the equation is not always that easy. Tax breaks, your goals,
and your mortgage's age are just three of the things that play into the
If you are in the position to pay off your mortgage early (congratulations,
by the way), ask yourself these five questions to see if doing so is your
best financial move.
1. Is your mortgage fairly new?
If so, you have many years of mortgage interest ahead of you, so you'll
enjoy tax benefits for years to come. And much of your payment is interest
right now so there's a lot of interest to write off. Paying off your
mortgage may not be in your best interest because you will lose out on the
deductions - especially if you are in a high tax bracket. Conversely, if
you have less than 10 years left on your mortgage or are in a low tax
bracket [or both], you are not getting much of a deduction, so paying it
off may be more beneficial to you.
2. Are your other important accounts funded?
How are your retirement and children's college accounts? If you're
paying off your mortgage to the exclusion of these other important
accounts, you're making a mistake. You need those investments as much as
you need your home. When you're faced with these big expenses, you don't
want all your money tied up in your home. Your home is the least liquid of
all of your investments.
3. Have you done the math?
Figure out how much you will save over the life of the loan, and compare
that to the tax savings. Also think about other investments you could make
with the money (mutual funds, bonds), and estimate their value as best you
can. Is it worth it?
4. Is the emotional appeal of owning your home outright more important
than other considerations?
If so, do what you need to do. The changing whims of the real estate
market can be stressful for a lot of people. Owning your home outright may
alleviate much of that stress. Your emotional security is worth more than a
5. Do you have debt?
Your mortgage is really the cheapest money you can get. Don't accelerate
your mortgage, which has an interest rate around 7%, instead of digging
yourself out of credit card debt, which can be as high as 20%! If you have
decided that paying early is right for you, determine the best way for you
to do it. A popular method is making a payment every two weeks. However,
you can end up stuck with a lot of fees. The best method is simply
increasing your monthly payment. Let's say you want to make one additional
mortgage payment a year. Take the amount of one payment and divide it by
12. Then, add that amount to your monthly payment.
Be sure your lender knows that the extra money is for your mortgage
principle. And, find out if there is any fee for paying early.
August's Home Value Improver
Make Your Home Office Work for You
More and more people work from home today, whether they do it full time
or for only a few days a week. Take advantage of working from home by
making your home office work for you. Even if you don't work from home, you
need a place to pay bills, file important papers, and do the business of
running your home.
Find your spot. New homes often have a room conveniently designated
for a home office. But, not everyone has a new home - or a home office. If
you're not fortunate to have that room, do not fear. You can create a home
office just about anywhere in your house. You may have a large landing on
your staircase, or a corner of the living room, or even a large closet. Any
of these spaces can be perfectly good home offices.
Claim your space. If you are using a spot that is part of another
room, try to keep it separate. Set up your office behind the couch, or use
a room screen to keep the office and room separate.
Plan the space. Avoid putting furniture down willy nilly. Think
about the flow of your work and your day. Do you want to sit by a window?
Be careful not to place your computer somewhere in which it will get too
much sun reflection.
Create your desk. If you don't already have a desk, you don't have
to race off to Office Max to buy one. With today's small laptops, you
really just need a place to be able to write, set out papers, and have some
storage. A board between two filing cabinets, a small kitchen table, or
just about anything that is a comfortable place to sit and work will
Decorate. Look around your home for items that will spruce up your
workspace. Do you have some old framed print or photographs in frames that
will jazz the place up? What about a comfy chair from the guest room? In
your office, it could be a cozy place to do work reading, conference calls,
or even napping (shhhh, don't tell the boss.) Paint the walls if your
office has walls. A fresh coat of paint can really make the room seem new
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The stock market is going crazy and the subprime mortgage
fallout continues. I thought summer was supposed to be quieter!
Too many people are struggling to make sense of the mortgage programs
they're in and how high their payments may climb. And it's become more
challenging than ever to get a new mortgage or refinance because lenders
are running scared.
Even if you did not arrange your current mortgage program through
Westchester Mortgage, I am always happy to help you understand the program
you're in. Please feel free to call or email anytime!
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Mortgage Minute in ForeclosuresMass.com's monthly newsletter.
This month's column: The Secret Behind Mortgage Rate Charts.