Getting rid of the mortgage is every homeowners dream but that doesn’t always mean it’s the best move.
Several things should be considered if you’re in a position to pay off your home loan. It can sometimes be more profitable to keep your mortgage account open and just keep making the minimum repayments. There is always a chance the equity you have in your home will be needed, if so and if your loan has a redraw facility, then you have easy access to funds and the extra cost for a new loan can be avoided.
Also, there are costs associated with paying out your mortgage so it’s not a bad idea to keep it going unless you are 100% sure you will never have a use for the funds again. Even if you only keep a small amount of, for example, $1000,the interest payment on that would only be around $6- at today’s rates and you would also have access to funds for investment when ever you’re ready.
Reducing your loan when interest rates are high by making extra repayments, when you can is a good idea, it will lower the total interest payment. This is especially good to do at the beginning of the loan when your payments are mostly interest, an extra principal payment per month added on to your regular payment can make considerable difference.
If you’re in a position to use this as a wealth creation strategy be sure not to go beyond what you can comfortably manage to repay. Whatever investment method you choose you should always do your own research, make sure you’re aware of all the costs involved and get independent advice.
Power Thought
I am growing towards wealth.
Repeat this to yourself often
Cheers
Teresa and the Team at
Photo
Danilo Rizutti:
http://www.freedigitalphotos.net/images/view_photog.php?photogid=851
Tags: home loan calculator, pay off home loan, wealth creation strategy
