Interest Rates and Your MortgageSubmitted by The Baran James Company, Inc. on December 9th, 2020
With the Federal Reserve keeping interest rates at or near zero, you may wonder about your mortgage. Is it a good time to refinance or even pay off the debt entirely? After all, your mortgage is one of the biggest expenses you may have in life, so why not rid yourself of that debt as soon as possible?1
Not so fast. There are many reasons why keeping your mortgage could be a better option than paying it off. Yes, you may eliminate one of the largest bills you have every month, but there are benefits to maintaining your mortgage as well.
1. Losing all your gains on your investments. Using funds from your investments to pay off your mortgage early may mean you lose out on potential gains. However, by keeping your portfolio untouched, you increase the chances of a return on your investment.2
2. Not having funds available for other debt. Your mortgage very likely has the lowest interest rate of all your debt. Consider paying off your other consumer debts or student loans with higher interest rates before you consider paying off your mortgage.2
3. Losing your tax deductions. Mortgage interest can be taken as a tax deduction. However, paying off your mortgage may mean your taxes could be higher.2 However, standard deductions are much higher and many people will not itemize.
2021 Standard Deduction amounts:
Single - 12,550 Married Filing Jointly – 25,100 Head of Household – 18,800
4. Risking changes to your home’s value. If you own your house outright and there’s a sudden shift in the market, your home may be worth less than what you initially paid. Conversely, if you own 20% of your home, and the mortgage company or bank owns 80%, your losses are capped at 20%.2
Are you considering paying off your mortgage or another large debt? It’s worth considering, but you need to look at all the factors which may affect you.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
1. Finance.Yahoo.com, November 5, 2020
2. FoxBusiness.com, November 3, 2020