ABC News reports on the pitfalls of paying off a mortgage early, in an article by Byron L. Studdard, CFP.
Whether to pay off your mortgage early is a difficult decision that should be based on various factors. Depending on your situation, some debt—especially mortgage debt–is probably not as bad as the alternatives. In this case, not paying off the mortgage would have meant keeping the couple’s 401(k) assets intact and growing in value through compounding interest, which is interest on principal and interest. Albert Einstein famously called compound interest “the most powerful force in the universe.”
There are many factors to consider when paying off a mortgage early. Here are three of the factors:
- Your total financial picture. Have you fully funded your retirement, including uncovered health care costs?
- The amount of the mortgage payment. Is it so high that it’s burdensome?
- Other investments you may have.
Read the ABC article: Pitfalls of Paying Off Your Mortgage Early. Mr. Studdard expands on many important factors to consider when paying off a mortgage early.