Sure, the idea of paying off your mortgage seems great. However, hitting that milestone could come with a price that just isn’t worth it.
Michael Bogardus, a Certified Financial Planner with the Harbor Oak Team at Barnum Financial Group joined Rob Hart on the WBBM Noon Business Hour this week to explain.
“If people want to maybe pay off their mortgage early, they might look at alternatives, such as stopping 401k contributions… and not building that nest egg,” Bogardus said. “And if they do that, they could forego, you know, company matches and the tax deferral, and then that can really compound as a pretty negative [thing] on their, their balance sheet.”
In the past, Audacy has reported on how retirement is becoming a luxury that some Americans can’t even afford. There are also some other factors to think about. Even if mortgage payments are out of the way, other associated costs – property taxes, insurance, Homeowner’s Association fees – still remain.
On the other hand, paying off a mortgage could free up a significant amount of money each month in someone’s cash flow.
Those also aren’t the only two options. Homeowners can also sell their homes and downsize, pocketing any equity they’ve built up over the years.
“I think the main thing to think about for most individuals is liquidity,” said Bogardus. “I think there’s an embedded guaranteed interest rate that you get, you pay off the mortgage early, you no longer have that cash flow constraint. But what does that mean to your overall cash flow? And I think that’s something that people need to really consider.”
