What Are The Key Disadvantages Of Having Your Mortgage Loan Paid Early?

By Author: J.J. Yong
Total Articles: 963
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There are two sides of argument on whether should one paid off his mortgage loan early or otherwise. Some strongly support the idea of having one's mortgage loans paid off as soon as possible, while some are really against this idea. So whose argument is right and what are the justifications?

Before any sound decision is made, it is worth-while to weigh their pros and cons. Append below are some of the strong justification shared by those who are against the idea of paying off the mortgage loans early,

a. The 'interest charged' on the mortgage loan is liable for tax deduction in the year it is paid. Furthermore, a large proportion of the mortgage monthly payments in the early years constitute of interest. A homeowner would effectively lower their borrowing cost through this tax reduction subsidy. However, this benefit would be lost if the mortgage is paid off early.

b. Some financial consultants argue that it is wise to keep your monthly mortgage payments regularly, and invest the extra money elsewhere which may be curbing a higher profit in return, instead of dumping them into the mortgage loan for ...
... principal reduction. There might be some good short term investment program from a financial institution, or it can be the model for a business you are keen to start.

c. You would be missing out on great investment opportunities and investment gain through mutual funds or through retirement accounts such as 401(k) and others, if one is to "lock" all the money for the mortgage payment only and not into any of these mutual funds or long term investment programs.

d. Furthermore, it makes complete sense for keeping some extra money in liquid form, rather than pouring them all into the mortgage repayment program. One will not be in a good "liquidity' position until the complete mortgage loan is cleared off and have your house sold. Keeping money in liquid form would be the best way and it is also very beneficial especially if one need to access the money fast in time of emergency.

e. With the increasing inflation rate every year, $ 1000 you paid as the monthly mortgage payment today might only worth $800 ten years from now when adjusted for inflation. Based on this theory and logic, it sounds logical to "utilize" the extra money for other usages sound to be more beneficial than dumping them into the mortgage plan.

Therefore, whether you should or should not be paying off your mortgage early is an option which you need to make after crucial considerations and thorough assessment of your current personal financial situation and long term objectives.
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