Why paying off your mortgage early might not be a smart move
A lot of people who purchased homes years ago are trying to pay off their mortgage loans early. But money experts say that's not always such a great idea.
The benefit, of course, is that you don't have a mortgage payment. The closer you get to retirement age, the bigger deal that becomes.
"People often look at that mortgage and they feel that it's something hanging over their head and they have to get rid of it as soon as they can," said Greg McBride, Senior Analyst with Bankrate.com.
While it may feel good to have a home that's paid for - McBride and other financial experts say being mortgage-free might not be ideal, if it means leaving other debt on the table.
"Paying off that low, fixed-rate, often tax-deductible mortgage, is at the bottom of your list of financial priorities." said McBride. "Use that extra cash to do some of the things that are higher priority."
For example, if you have other high-interest debt from personal loans or credit cards, if you're not paying the maximum contribution toward your retirement saving, or if you have little or no emergency savings, paying off your mortgage early may not be as wise as tackling some of those other areas of your financial picture.
"Pay off higher interest rate debt. Get rid of the credit cards, the personal loans, other high-cost debt that you have. Max out your tax-advantage retirement savings options. Pour the money into your 401k, in your IRA."
Financial advisors stress that every homeowner's situation is different. But in a financial emergency, high-interest consumer debt and low savings can often wipe out the perceived advantages of an early mortgage payoff.
Experts also warn that depending your income, paying off your mortgage early could cause you to lose out on your mortgage interest tax deduction - which could mean you pay more in taxes in the long run.