Mortgage debts, which are among the most common forms of American debt, are frequent topics of discussion between financial planners and their clients. Typically, the advice of financial planners is to wait on paying off a mortgage quickly, since it is the most positive form of debt. Mortgage debt is considered the best form of debt due to the low-interest rate and tax benefits that come with it.
Take into consideration rates, financial health & other debts
Sophia Bera, a financial planner interviewed by Business Insider, offers a detailed, nuanced analysis of when mortgages should be paid off.
The first thing that should be considered by those working to have financial health, according to Bera, is to pay off any other debt before thinking about an increased mortgage payment. Most other forms of debt, such as credit card or car payments, typically have higher interest rates and should be paid off first.
If mortgage debt is the only debt that has yet to be paid, Bera still advises caution: “If your mortgage is the only debt you have left, I would want to know more about your mortgage: Is it a 15-year or a 30-year mortgage? What is the interest rate? When do you want to retire?”
Consider switching to a 15-year mortgage
It seems that paying off a mortgage is a bit more complex than merely paying down debts across the board. Those who have a 30-year mortgage who want to pay it off quickly should switch to a 15-year, which has a lower interest rate, before upping their payments.
Those who plan to retire in the next 10 to 20 years should also consider whether or not spending a large sum of money now to remove debt is wise, considering they will stop working and need to ensure that their retirement funds are in order.
But if there are no incoming debts, impending retirements, or other large expenses on the horizon and no other debt but the mortgage, financial planner Sophia Bera said that those people can freely put larger sums toward their mortgage and enjoy the benefits of their success as financially savvy Americans!