Ameritrain 5 May , 2022 Ameritrain
As mortgage professionals know, the burden of debt, especially when it comes to the high price tag of a home, can be a significant worry to many of their clients. However, what most homeowners may not be aware of is that paying their mortgage off early can have a negative impact on their financial health. So, whether they’ve recently come into money or they’re working hard to bump up their monthly mortgage payments, here are some reasons you may want to hold off on advising them to pay it off too quickly.
Homeowners may not be aware of is that paying their mortgage off early can have a negative impact on their financial health.
Creating A Credit History
For many homeowners, it can certainly be a weight off their mind to pay down their mortgage if, for example, they happen to inherit a substantial sum of money, but the monthly payment has the added benefit of positively impacting their credit history. While paying down debt may free up their mind to think about other things, the month-to-month payment of the mortgage will prove their reliability to a lender and enable them to take advantage of the tax breaks associated with consistent mortgage payments.
A Limited Disposable Income
For many people, it may be fulfilling to pay down debt by foregoing some of their monthly expenditures, but a stringent budget can be very limiting. Forcing themselves to save money consistently and sticking with a budget is good in the long run, but cutting back on all the things they love in order to pay off more debt can make for unhappiness and added stress. Therefore, it could be very valuable and fulfilling for them to find a balance between paying down debt and enjoying life.
Extra Money To Invest
The feeling of being debt-free is a good one, but for most people to be putting most of their money into a mortgage will likely leave them with nothing to invest or save. Many homeowners think that the savings will make up for the money that’s not being invested, but this is not necessarily the case. According to Elle Kaplan, CEO of LexION Capital Management, “A smart investment plan is very likely to outmatch any savings you’d get from paying off a home early.” So instead of putting all their funds into a mortgage, it may be a lot more beneficial to set aside money for saving and investing.
“A smart investment plan is very likely to outmatch any savings you’d get from paying off a home early.”Elle Kaplan, LexION Capital Management
Many homebuyers think it’s a good financial move to pay down their mortgage early, but as an advisor, the LO should not forget to mention the not-so-obvious benefits that come with not putting everything into a mortgage payment. It can be better for their credit and bank balance to make consistent payments and start investing early.
If you’re a mortgage loan officer trying to continually build your expertise to serve your clients better, you may want to check our other Ameritrain blog posts for information, ideals, and ways to stay ahead of the competition and become an invaluable asset to new and experienced homeowners.