What are the drawbacks on paying off a house early?


Well, can there be a disadvantage of paying off a house early ever? What could be wrong with owning your home free of mortgage debt? The main advantages of owning your home free of debt are two:

  1. You just don't have to worry about mortgage payments every month;
  2. Home market value may rise or go down without the possibility of leaving you in more debt than house sale can satisfy.

However, there are some disadvantages, too.

Disadvantages of Paying off a House Early

Prime mortgage loans usually have very lower rates than any other debt. Credit cards, for example, have much higher rates after the initial period, and quick personal loans carry higher rates, too. And while as a homeowner it makes sense to pay off your house mortgage early, for an investor a house is simply an asset and it makes more sense to pay off high rate debt, rather than a low rate home loan.

Another drawback of early house mortgage pay off is that you deprive yourself of tax savings. Mortgage interest tax deductibility is one of the greatest benefits for homeowners. Why lose those, especially if you are on a large tax bracket?

In general, if you want to invest for the future, you have at least 12 years before retirement, your mortgage loan has lower rate than your other investments level of return, and you are financial savvy, there is no reason for you to pay off a house early.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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