According to a recent USA Today article, paying off your mortgage early may not be the most beneficial move. While it may seem like the entire goal of getting a home is to pay it off, there are actually certain benefits that only apply to those who have not paid off their mortgages. Here are three benefits of waiting to pay off your mortgage:
- You can no longer claim your interest. According to USA Today, “Paying all that mortgage interest has a benefit, and it comes in the form of a potentially sizable tax deduction. If you're in a high tax bracket, losing out on this deduction could mean paying more in taxes, especially if forgoing it pushes you into the next higher bracket. Let's say you're in the 25% tax bracket and currently pay $24,000 in mortgage interest per year. That's a $6,000 tax break you'd be giving up by paying off your mortgage.”
- Your liquidity may be limited. Because the housing market right now isn’t particularly liquid, it can take a little longer than usual for sellers to flip a home. If you’re stretching yourself by using a large portion of your savings or disposable cash to pay off your mortgage, you could be losing a lot of your liquidity.
- It can’t really provide you with income. In short, if you have a good interest rate, using your cash on hand to invest, rather than to pay off your mortgage, can have a bigger pay off in the end.
Source: USA Today