I’m about to state the obvious: nobody likes being in debt. Truth, right? And if given the chance, I’m sure most of us would prefer to pay off our debts faster, so that we pay less interest overall and so that it’s not hanging over our heads forever. Well, this recent article by Jonathan Fahey of the Associated Press distinctly describes why it’s not a good idea to pay down a mortgage faster than the terms of your loan. Intrigued? I sure was. Read Fahey’s argument as posted in the Bradenton Herald:
“The impulse to pay off your mortgage more quickly than you need to is understandable, especially these days.
Interest rates are near historic lows, so it’s possible to replace a 30-year mortgage with a 15-year loan and still afford the monthly payments. Or, if you’ve already refinanced at a dirt cheap rate, you can take those savings and pay down your principal faster.
But the allure is more emotional than financial. Mortgage debt provides great financial flexibility, and paying it down fast probably isn’t the best way to grow your nest egg.
“Generally speaking, there’s no advantage to paying down a mortgage earlier than you need to,” says Greg McBride, senior financial analyst at Bankrate.com.”
Click here to discover why there is no real advantage to paying off a mortgage earlier than necessary.
I’ll admit I was skeptical from just reading the headline of the article, but I see Fahey’s point (and he does make several good ones.) So if you fall into that boat of people who are paying more each month than your minimum mortgage payment in an attempt to pay the balance off earlier than planned, well first of all kudos to you for the effort, and second, give Fahey’s article a read to see if it doesn’t apply to you. If it doesn’t, then have at it! If it does, thank me (and Fahey) later.