Posted by John Doe
What a monumental achievement, to reach a stage in your life in which you have paid what will seemingly be the most portentous debt you will ever carry; in essence, it is the pinnacle of financial goals. However, your happiness, although entirely deserved, should be judiciously pondered. The resolution to pay off your mortgage sooner than you had anticipated initially may seem like the superior choice, but in reality, doing so becomes a snowball for many more problems down the road.
At Mortgages, Mortgages, we feel that examining your options is critical to making a sound financial decision for your peace of mind in the present and future. There are some vital factors to consider, which ultimately define what paying off your mortgage will mean for you.
Consider Your Interest
Should you endeavour to pay off your mortgage early, with the quintessential 30-year fixed year mortgage? The pervasiveness of your monthly payment within the initial years does quite little to reduce the principal of your loan. The majority of it is fundamentally going towards the interest on your mortgage; this means that you will be paying substantially less in interest over the life of your loan since the principle has decreased. Paying down more of your principal means your savings will compound over time. With that said, the lower your interest rate, the less you stand to benefit through the early retirement of debt.
Consider Your Taxes
For those who can deduct their mortgage interest, it is an indispensable factor in terms of overall tax strategy. You must effectively deduce if you will be able to continue with your advantageous system if you choose to focus on paying off your mortgage. During the first years of a mortgage, when your interest payments are at their peak, many homeowners will benefit from a substantial deduction. If you fall into a higher tax bracket, this information is quite influential; tax savings are less of an incentive if you have low-interest payments.
A rather compelling factor about paying off your mortgage early is the simple fact of directing excess cash towards your mortgage loan. This means you are not making those funds available to contribute to your retirement at the expense of your investment options and other goals. As well, it may impact your tax situation.
Consider Your Investments
When making financial decisions, it is not uncommon to be impractical in your investing goals, more definitively in committing to directing your excess cash to your investments. Although your intentions are both prudent and diligent, actually following through is pivotal. Our team advises that a powerful way to execute your assurance is to arrange direct deposits into your brokerage account or to increase your contributions (set and forget).
Consider Your Finances
Although you may feel shielded from not having the extra cash flow, you are secure that the money is available, and it’s crucial to consider what may ensue if your life circumstances were to vary, consequently affecting your finances. A precise and resourceful analysis of your financial liabilities is imperative before moving ahead with any decision. One should contemplate credit card debt, student loans, and often overlooked, an emergency reservoir before reducing or eliminating your mortgage.
Consider Your Personal Timeline
The decision to pay down a mortgage ascertained on your exclusive timeline until your retirement, coupled with your fortitude in terms of risk, is pragmatic. With a possible 10-year timeline or more leading up to your golden years, you will still be able to begin building your cache for the future, investing money you formerly used for mortgage payments. Having a small mortgage may also afford you the capacity to invest. In terms of risk, we commonly perceive that the closer one is towards approaching retirement, the more reactionary they are in terms of asset allocation. In such a case, you may feel that investing extra money connotes with unnecessary risk. For others, being debt-free later in their life span is extremely important.
Consider Your Perception of Debt
You may have resolute feelings about debt, which would define how secure you feel about financial decisions and ultimately determine your investment procedures. Many homeowners demand the need to be released from inhibiting obligations and prefer to own their home, paid in full. The result is the sense of freedom and gratification that comes with finally achieving ownership.
Consider Your Horizon
If you intend to remain in your home for the long term, it makes sense to consider overpaying your mortgage than if you don’t anticipate ever paying off this loan. Owning a home outright may be an advantage if you plan to sell it during the next few years. Additionally, you could potentially leave your existing residence with more home equity.
The question of which option is superior is always up for deliberation; homeowners will scrutinize the pros and cons with diverse obligations, ambitions, and thoughts about debt and personal finances. The results and opinions will be as unique as the individual. The choice indicator, in any case, should be setting pragmatic intentions. Your ultimate plan should reflect a means of realizing your aspirations. At Mortgages, Mortgages, we are experts in your investment planning, along with understanding the personal facets that connect with your investments, both short and long term.
We feel that flexibility is quite relevant in this process, determining your best financial future. If you find you are still undecided about paying off your mortgage early, it’s a smart decision to take a pause and reflect without pressure. In the meanwhile, remain tenacious and continue your deposits to a savings account dedicated to your excess cash flow and revisit the decision in three to six months.
Contemplating and weighing the effects of two very diverse plans of action, paying off your mortgage early or saving for retirement, certainly defies the level of comfort you would have hoped to achieve at the onset of your mortgage journey. This is not merely because there are so many fundamentals to consider, but also because you ultimately aspire that you will make the wisest choice, limiting any motivation for contrition. At Mortgages, Mortgages, our expertise is secured through our symbol of distinctiveness. We embody a group of Ontario mortgage professionals, each with unique knowledge to award.
We encourage you to connect with us to assist in exploring what would be ideal for an individual like you. Please speak to a member of our team at Mortgages, Mortgages directly at 1-866-307-0727 or contact us here, while you review the services and loyal assistance we honour to deliver.