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Making extra payments on your mortgage? Many people do — they’re anxious to get that mortgage paid down as quick as they can. But especially with interest rates this low, that might not be the best place to put that next dollar.
Certainly keeping a mortgage is not for everyone. If your DNA is so debt-averse that you can’t sleep at night knowing you owe someone (not exactly a bad character trait to have), paying off your mortgage can give you peace of mind and a good night’s sleep. When you have all of the other aspects of your financial plan in place — your emergency fund is stocked, you’ve saved enough for retirement or are well on your way, you are carrying no other debt — then go ahead and make those payments if it helps you sleep better at night.
Planning to sell your underwater or just-treading-water house in the not too distant future? You might be in a position to need to bring money to the closing table or walk away with a small amount of cash, not leaving much for the down payment on your next home. In that case, paying extra on your mortgage for a period of time prior to the sale may yield a bit more return than simply stashing the savings.
Especially if you have been able to take advantage of the historically low interest rates we’ve experienced for the past few years, bypassing those extra mortgage payments can gain you more ground in other areas. But those dollars you could have put toward your mortgage and didn’t are only valuable to you if you actually do something useful with them. Letting them be mindlessly consumed by lifestyle spending is the worst alternative to paying down your principal. As with all things in life, being purposeful with your money is the key to being successful.
Image: iStockphoto
December 13, 2023
Mortgages
June 7, 2021
Mortgages