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5 Reasons You Shouldn’t Repay Your Mortgage Early

What?! Almost every person on the planet with a mortgage will find this logic flawed to put it nicely. To put it bluntly, you probably find it stupid. Common wisdom dictates that you need to pay back your mortgage as soon as possible. Then, you have more money and freedom in your life. The problem is that common wisdom is wrong. Paying back your mortgage on a slow and steady basis is the best option for most homeowners, and here’s why.

There Are Better Investments

A property is a great investment for the long-term. By the time your mortgage finishes, you own a valuable commodity that you can sell or pass down to your family. Still, that doesn’t mean that a property is the best investment. There are plenty of great investments out there that could make you a ton of money like gold or bonds. The returns on these commodities are far greater than the returns on real estate. Quite simply, you could make lots more if you didn’t splash your extra cash on your mortgage.

You Need To Diversify

Paying off your mortgage seems like a good idea because it will make you money, right? You won’t have to make any repayments, and the house is all yours. Look at that statement closely – where do you make money in that scenario? You don’t make any money from paying your mortgage back early. All you do is become debt-free quicker than usual. To solidify your finances, you need to diversify your assets. By investing money into your assets instead of your mortgage, you will get a bigger payout. Overall, your financial position is far stronger with a host of valuables rather than one property.

Think About Your Cash-flow

Using your money to pay back your mortgage early means that you need extra cash. As you know, money isn’t easy to come by, and there will be times when you need a helping hand. With this in mind, is it better to pay off your mortgage or save for a rainy day? Saving for a rainy day is always the best option according to market experts SMBIA. If you have money in the bank, you can use it to get yourself out of a sticky situation. And, you can carry on paying the mortgage payments. No cash-flow means you will end up losing the house too.

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Lose Money On Inflation

At the moment, inflation is at an all-time low. However, your mortgage isn’t a short-term agreement – it can last up to thirty years. During that time, inflation may rise, and your property may benefit from the increase. As long as the inflation rate doesn’t rise too high, your final payment could be as much as a third less than normal. In real terms, the value of your payments reduces over time. Pay it off early and you won’t be able to take advantage of this hack.

Tax

You can save money on tax thanks to your mortgage. However, when you pay it off early, you lose this benefit. In fact, you can lose money because the savings in tax can be that great.

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