Like our grandparents, a lot of Colorado home owners want to pay off the mortgage early and "own" their house quicker than their existing mortgage. Home buyers often will make extra payments or larger mortgage payments to paying additional interest. Home owners will also often make large down payments and obtain 15 year mortgage loan to help them "own their home" and not have to worry about making mortgage payments when they retire. However, paying off their home in Colorado may be costing more money than it saves.
Grandma told you to drink whiskey for a sore throat (although I think she was actually right on this one).
Even though paying off your mortgage and owning your home in Colorado free and clear of any liens may bring a sense of pride and relief from making a monthly mortgage payment, there are no other advantages. Having a mortgage actually provides Colorado home owners with many benefits and advantages. We will focus on the financial benefits for this posting.
Grandma thinks Country Buffet and Furr's are good.
A mortgage is the cheapest money most Colorado home owners will ever have access to obtain. Mortgage interest rates have been in the four-five percent range for some time and if you take in to consideration the tax deduction available to home owners the actual cost is close to 3%!!! Try finding long term or even short term financing below that.
Grandma taught you that shaving your hair will make it grow back thicker.
Due to the fact that mortgage financing is so expensive, it's often beneficial for home owners to invest their additional money or fund their retirement accounts versus paying down their mortgage. While, the markets have not been the best investment options over the last few years, over the long term you will be able net well more than the 3% you pay on your mortgage. I advise many clients to view the equity in their home as an asset and part of their investment portfolio. As with any good portfolio it's always important to diversify your assets, this includes keeping the equity in their home in balance with the rest of their portfolio.
Grandma still thinks it's okay to drive even though she can't see the TV anymore.
Another advantage of a long term mortgage is your payment never increases. Your mortgage payment doesn't ever adjust based on inflation; therefore, your income will increase and your mortgage payment will stay the same. Could you imagine paying the same price for gallon of gas that you did 25 years ago!!! In 1985 the median household income was only $23,618 (the national debt was only $1,817.5 Billion) and now the median income is over $50,000 (national debt now 14,307 Billion and counting). Even though the amount of your payment never changes, your payment decreases over time.
Remember, just because your grandma paid off her house, doesn't mean it's right. If you would like more information on this subject please feel free to call or email. In my next post, I will actually discuss how a big long mortgage can actually help you keep from losing your home.
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