Owning a property is often considered the epitome to which many of us aspire when looking back on our lives. Having achieved the goal of homeowners, the majority then invest time and effort into paying off the mortgage as soon as possible. Except, is this the best thing to do? Let’s discuss the potential as well as the disadvantages of making additional payments on your mortgage.

Advantages of Keeping Your Mortgage

Preserving Liquidity: Paying off a mortgage early reduces available cash, which can cause problems in the face of an emergency or unexpected opportunity. With a mortgage, you have a pool of money in case of a rainy day or to purchase a winner.

Harnessing Investment Power: Historically, mortgage interest rates have been lower than investment returns. Given this, by putting money into investments with higher returns, you can come out ahead of the interest you save by paying down your mortgage early.

Tax Benefits: In some circumstances, mortgage interest counts as a tax deduction, reducing how much you pay in taxes overall. Repaying early before your debt is completely forgiven eliminates that benefit, perhaps forcing a major adjustment to your tax strategy.

Flexibility for life changes: Life is full of curveballs. If your mortgage is paid off, you can respond better to a job loss, a move, a health catastrophe, or a forced life change of some other kind. You can get a handle on it in a way that you can’t if you’re stuck in a mortgage. Having equity or access to capital freedoms helps you cope.

Disadvantages of Keeping Your Mortgage

The Interest Burden: A mortgage builds up a considerable amount of interest over the years. The earlier you repay the loan, the less interest you’ll pay altogether – and end up saving a substantial amount of money.

Psychological emancipation: debt can be draining. Paying off your mortgage can bring you a huge amount of psychological satisfaction and financial liberation.

EQUITY AT THE SPEED OF LIGHT: Every mortgage payment increases the equity stake you have in your own home. Paying off your loan sooner increases this ratio, enhancing your property ownership position.

The Bottom Line: It’s a Personal Choice

There is no right answer. Whether it makes sense to pay off a mortgage early depends on your circumstances, risk tolerance, and your financial goals. Talk to your financial advisor about creating a strategy that is right for you.

Nevertheless, reaching financial freedom is not just about getting out of debt. It is about having a strategy that allows you to deal responsibly with the ‘black swan’ events of life while providing for a safe and prosperous long-term future.

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