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Factors Affecting Your Decision Of Payoff Mortgage

There are many who wonder should I pay off my mortgage or is it a good idea to refinance your mortgage for taking the advantage of low rates of interest, reduced monthly payments and the use of extra money for other requirements? There are several tips that can help in making the right decision.

Tax Wise, Is it a Good Idea to Pay Off Mortgage?

It is essential to note that as you payoff your mortgage, the value of the mortgage deduction for tax purpose goes down. But, income tax goes up at the same time because you can no longer deduct the interest of the mortgage from your taxable earnings. So, if you are wondering should I pay off my mortgage, then the answer would be a simple NO, however, only from the tax perspective. Experts are of the view that possessing an leveraged asset or a house without mortgage is always a good thing. In case you experience financial difficulties, having lesser debt burden helps in reducing life expenditures. The people who have been able to pay off their mortgage or refinance their mortgage have done this only when the rates have fallen. Instead of playing off your mortgage, you can always consider mortgage refinancing a good option. This will have you in the position of reducing your payments. However, there are other experts who are of the view that individuals in their retirement age should pay off their mortgages instead of investing more in bonds and stocks. While the rates of interest on mortgages are low, experts say, the market is on all time highs and both bonds and stocks seem to be overvalued.

When is it Wise Not to Pay Off Mortgage?

There are several reasons why it would not be wise for you to pay off your mortgage early. The reasons are as follows:

Leverage

By carrying out the procedure of borrowing money for lengthy periods of time at a low interest rates and then investing the difference, people can end up having more wealth versus paying off their mortgages.

Right-Sized Debt

Individuals generally take up too many mortgages because they buy many houses. If paying off a mortgage is a major concern, people must consider the probability they bought too many houses. Right-sized debt amount is considered favorable to the wealth growth for a long term assuming a low rate of interest environment.

How does the Age of an Individual Affect the Decision of Paying Off a Mortgage?

Young people are quite aggressive about investing. They generally like to invest rather than pay off their mortgage. As people get closer to their retirement age, they start investing more and therefore paying off a mortgage becomes a very attractive option for them. It is also to be noted that people in their age of retirement generally like to keep off from the burden of paying a mortgage. Therefore, if you are in retirement age and if you are thinking should I pay off my mortgage then the answer would be a YES.

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