Pay Off Your Mortgage Sooner... or Later?

Pay Off Your Mortgage Sooner...or Later?   

If you're a homeowner, it's only natural to long for the day when you'll own your house free and clear. To reach that day sooner, some homeowners accelerate their mortgage payments by paying extra toward the principal each month, once a year, or whenever they can afford it.

It's satisfying to see your mortgage balance shrink faster, and you'll shave thousands of dollars off the total interest you'll pay over the life of the mortgage. But is prepaying your mortgage a smart financial move? That depends on a few factors.

Before you give in to the strong emotional pull toward paying off your mortgage faster, ask yourself a few questions:

•       What’s your interest rate? If you have a 30-year mortgage with a low fixed rate, stay in it, financial planners advise. Consider what else you need to do with your extra money.

•       Are you carrying credit card debt? Pay that off before you even think about prepaying your mortgage.

•       Are you saving and investing? It's unwise to channel more money into your mortgage and ignore contributing to your 401(k) at work if you have an employer match. You're passing up free money. Once you max out your 401(k) contribution, you also may be able to set up a Roth or traditional IRA. You grow your money by saving and investing, not by prepaying your mortgage.

•       What's your risk tolerance? Some financial planners suggest prepaying your mortgage if it means you'll sleep better at night. Others argue against that logic, saying you'll only create a nightmare later. You could end up with all your money tied up in your house, but unable to afford to live in it because you have no other wealth.

It's difficult to set aside emotions when weighing whether to prepay your mortgage. Talking to an objective party can help. ICCU offers financial planning services that can help you with this decision. Stop by or call us today at 989-773-5927.

Isabella Community Credit Union ∙ 989∙773∙5927