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Paying Off Mortgage Loans Early Considered a Terrible Financial Move Among Homeowners
Generations past have advocated for paying off mortgage loans sooner than later, but Go Banking Rates uncovers a fierce debate circulating among current homeowners and market professionals going against the age-old dream of owning a home outright.
The prospect of paying off a mortgage earlier rather than later often brings relief and elation to some homeowners, but while the idea of owning a home free and clear is a concept that generations past have encouraged, some Americans are no longer on board with this idea, citing disadvantages to paying off mortgage loans before their terms are up.
Drawbacks to Paying Off Your Mortgage
With so much talk of consumers finding themselves neck-deep in debt, the motivation behind paying off a mortgage loan makes sense — after all, mortgage payments are among the largest monthly expenses in U.S. households. But there are deeper financial implications to paying off your mortgage than some homeowners recognize.
Homeowners cite the following reasons for dragging out their mortgages:
1. Homeowners Lose Mortgage Interest Deduction
2. Miss Out on Today’s Low Mortgage Rates
3. Possible Pre-Payment Penalties
4. Reduces Liquidity
Idaho homeowner, Nick Drzayich, explains why tying up discretionary funds into a mortgage is a bad move.
“Let’s say I’ve been making extra mortgage payments for the last 10 years. In total, I’ve contributed an extra $20,000 to reduce the principle balance. Suddenly, I lose my job, so I go to the bank and say, “Hey, I’ve been paying extra for the last 10 years; can I have some of that extra to help cover expenses until I find new job?
“They will say, ‘Well, first you have to qualify for that money, and seeing as how you have no job we can’t give you access to that money.’”
Mortgage professionals point to an interesting reason why homeowners would want to pursue paying off their mortgage loans early.
Lingering Benefits of Paying Off Mortgage Loans
Homeowners who still champion the traditional goal of paying off mortgages identify almost as many benefits to getting rid of mortgage debt as those who oppose this approach.
However, the biggest perk to paying off your mortgage loan isn’t necessarily a financially-
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