8 Reasons Why You Don't Want to Pre-Pay Mortgage, But Should

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5. Their argument: "Money prepaid into a mortgage is not liquid."

My response: This is the most compelling argument against mortgage prepayment. I suppose it is the one risk of prepayment as an "investment." A couple of thoughts: I always believe in taking the sure savings over the possible problem. You may never have an emergency that forces you to tap the cash that is stashed in your house. If you suddenly do, you will have to refinance or take out a home equity loan and your chances of approval are much greater if you have substantial equity in the home --which you can get by, you guessed it, prepaying your mortgage.

6. Their argument: "What if the homeowner doesn't plan to keep this house anyway?"

My response: That's fine. There is no rule that says you can't sell a home that is already paid off. It gives you more equity to put toward the next one.

7. Their argument: "Real estate prices have fallen."

My response: "That's irrelevant. The amount of money you invested in your house was determined back when you bought it. If values have fallen, you still owe the same amount, whether you pay it now or pay it later when you sell. Furthermore, by prepaying your mortgage, you can save thousands in interest payments and at least cut your losses.

8. Their argument: "You could lose your equity through foreclosure."

My response: If you get behind on your house payments and you have no equity, that's when you are forced into foreclosure. If you get behind on your payments and you have equity –especially the extra equity you gain by prepaying—you can sell the house before the bank forecloses.

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