Total mortgage debt in the U.S. reached $11.18 trillion at the end of March, according to the Federal Reserve Bank of New York. Mortgage debt accounts for 71% of all household debt – the highest in decade. Many homeowners dream about paying off their mortgage early for peace of mind. (See the most popular cities for homebuyers.)
Though generally paying can be a wise financial decision, it can also carry several risks. 24/7 Wall St. created this list of five common mistakes made when paying off a mortgage early based on a report produced by financial technology company SmartAsset, entitled 5 Mistakes to Avoid When Paying Off Your Mortgage Early.
It is understandable you want to wipe the slate clean and have one less debt to pay each month. Yet you could leave yourself cash strapped if you plow too much money into paying down your mortgage. Instead of using any extra cash to pay down the mortgage, you can put it to better use elsewhere, like the stock market, where you could earn higher returns. Also, once you pay off your mortgage, you are no longer eligible for a federal mortgage interest rate deduction at tax time.
Whether you pay down your mortgage before the end of the term is a personal decision. Not having mortgage payments every month lifts a huge burden. Just beware that doing so could cost you if you do not consider all your options and possible pitfalls. Looking for more cash? Try one of these 28 ways to make extra money.
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