In full disclosure, this strategy is NOT for everybody. This idea can only work for someone who has positive cash flow and/or available cash. This is not for people who are struggling to pay their monthly bills.
For those who this strategy might make sense, let’s discuss what this idea fully encompasses.
Loss of Mortgage Interest Deductions
This is by far the biggest objection against the accelerate mortgage pay-down. Paying down your mortgage earlier causes you to lose future tax deductions because interest charges will decrease more rapidly than if you stuck to your regularly scheduled monthly payments. So what? The Tax Cuts and Jobs Act imposes stricter limitations on home mortgage interest deductions for 2018-2025, anyway!
Impact of Future Inflation or Deflation
If inflation rises, paying down a mortgage with a relatively low interest rate earlier than required might not make sense. But, if there is a period of deflation, paying down a mortgage when dollars are cheaper is a good strategy,
Continuing the Program After Your Mortgage is Paid Off
The accelerated mortgage pay-down strategy can be beneficial in and of itself because interest charges are avoided, and debt is eliminated from your personal balance sheet. However, the biggest advantage from following this strategy is reaped by the people who have the cash-flow and discipline to continue the program even after the mortgage is paid off. This involves taking the monthly amount that was being paid out for a mortgage and putting it into a retirement savings account instead.
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