The goal behind paying more than your required monthly mortgage payment is to save on money that would be paid to interest down the road, but with today’s interest rates is that the best use of your money? To answer that question we must first understand that your home, bad or good, is an investment. Owning a home with equity in retirement can be a powerful financial asset. Having the option of being able to pull the equity from your home to create a stream of income can be a tremendous advantage and financial safeguard. For those of you with a permanent life insurance policy, we can show you how to really unlock the potential of your home’s equity, but that is for another discussion.
If your home is losing its value (like most in today’s market) does it make sense to pay extra money into the mortgage? Would you be better off to take full advantage of the tax deduction by only paying the minimum mortgage payment and funnel additional funds into an investment that will actually make you money? Conversely, if your home’s value is increasing does it make sense to pay extra money into the mortgage? Again, would it make more sense to pay the minimum amount, take the tax deduction, invest the additional amount and allow your home’s equity to grow naturally as its market value grows? Buy low, sell high.
Still concerned about the money that you pay in interest on your mortgage? Good, you should be, but with today’s low interest rates, combined with the mortgage tax deduction, you do not need to look far to find a guaranteed return investment that will outpace the interest you pay on your home. Too often our eyes are focused on individual trees and in doing so, we don’t see the forest. In other words, we miss the money that we are really gaining or losing.
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