Cody Sims: Should You Pay Off Your Home Mortgage Early?

Wednesday, April 21, 2021 - by Cody Sims
Cody Sims
Cody Sims

Many people who carry a home mortgage dream of the day when they will no longer face the burden of a monthly house bill. They want the financial freedom – and the satisfaction – of owning their home outright. Does that mean you should make paying off your mortgage early a priority? The answer depends on your circumstances and goals. One question you should ask yourself is, “Would the money you spend on your home loan be better spent on or invested in another financial opportunity?” 

Getting a different perspective on debt
Reducing debt as early as possible could help you avoid costly interest rate charges. You may have experience with this principle if you’ve eliminated credit card debt or a car loan. While your home mortgage is a type of debt, the same concept may not apply. In certain instances, staying true to your repayment terms may be best for your financial situation for these reasons: 

The interest rates on mortgages tend to be more reasonable than other types of credit, and the terms often provide more certainty (30-year fixed rate mortgage).

The interest you pay can potentially be deducted from your taxes. This deduction makes a mortgage much more cost-efficient on an after-tax basis than most other forms of debt. If mortgage interest is part of your tax strategy, consider if you’ll be able to itemize deductions once you own your home outright.

On the other hand, the earlier you pay off your loan, the longer you could have the opportunity to invest the money each month. This additional investment could help you achieve a more secure financial future. To see if investing may make sense, compare your interest rate to what you could reasonably expect to earn in market returns. 

Factoring in time
As you evaluate your situation, you should consider the time you expect to stay in your home and how close you are to retirement. Those who are approaching retirement or are already retired may prefer to be done with the monthly expense of a mortgage. Since this is also a stage in life when your investment approach may be more conservative, the tradeoff of reducing your balance rather than investing may not be as significant. Those who are in this position may want to consider if accelerating payments today would help reduce housing expenses in retirement. 

The same is true for those who plan to stay in their homes for a long time. Reducing your loan may be appealing if it results in years of living without a house bill. Younger homeowners should explore methods of accelerating their mortgage pay down. Among the strategies to consider are contributing more money each month, refinancing your mortgage over a shorter term (i.e., a 15-year mortgage instead of a 30-year one) or occasionally making a larger, lump sum payment to reduce the balance.

Considering the emotional side
Deciding if you should carry a home mortgage is not only a rational decision, but an emotional one as well. Your home is where you raise your family, create memories and return to each day. How important is it for you to know that you will own your home free and clear? 

As you think about your decision, be sure you’re in a position to not jeopardize your financial security today by putting additional funds toward your home. Adjusting your monthly bill will impact your cash flow, and you’ll want to have flexibility in your budget to cover unexpected expenses. Review your financial circumstances carefully before you decide what’s right for you. 

* * * 

James “Cody” Sims, CRPC, AAMS, AWMA, is a financial advisor and franchise owner with Ameriprise Financial Services, LLC. or a financial advisory practice of Ameriprise Financial Services, LLC. in Chattanooga.  He specializes in fee-based financial planning and asset management strategies and has been in practice for 26 years.  To contact him: ameripriseadvisors.com/james.e.sims, 648-2900, 412 Georgia Avenue, Suite 210, Chattanooga, TN 37403 



Chattanooga Chamber Calendar Of Events May 17-21

BBBS Chattanooga Recognizes Employee For 30 Years Of Commitment To The Agency

Chattanooga-Based Skuid Named Best Workplace By Inc.


May 18, ONLINE: Red Bank/Signal Mountain Council Meeting noon-1 p.m. Join us for some great networking and to hear from guest speakers Register here . No cost. May 19, ONLINE: ... (click for more)

Tina Franklin’s 30th anniversary with Big Brothers Big Sisters of Greater Chattanooga is May 15. Over 30 years, Tina has seen the standards and requirements of Big Brothers Big Sisters change, ... (click for more)

Skuid, a toolkit for creating human-centered digital experiences, has been named to Inc. Magazine’s annual list of the Best Workplaces for 2021. The list came from a wide-ranging and comprehensive ... (click for more)



Business

Chattanooga Chamber Calendar Of Events May 17-21

May 18, ONLINE: Red Bank/Signal Mountain Council Meeting noon-1 p.m. Join us for some great networking and to hear from guest speakers Register here . No cost. May 19, ONLINE: Southside Community Coffee 8-9 a.m. Join the Southside Council for their monthly Morning Joe. Held monthly on the third Wednesday of each month. Register here . No cost. ... (click for more)

BBBS Chattanooga Recognizes Employee For 30 Years Of Commitment To The Agency

Tina Franklin’s 30th anniversary with Big Brothers Big Sisters of Greater Chattanooga is May 15. Over 30 years, Tina has seen the standards and requirements of Big Brothers Big Sisters change, but she has remained steadfast to the mission. "One thing has not changed over this history, Tina has been in the exact same office for the entirety of her 30-year tenure," officials said. ... (click for more)

Breaking News

Parent Group Calls For Mask Mandate In Schools To End Now; Opponent Says Just Wait A Few Days

A group carrying signs and shouting slogans told members of the County School Board on Thursday night they want a school mask mandate to end now. Supt. Bryan Johnson earlier said on June 1 - a couple of weeks away - staff and students are not required to wear masks to ward off the coronavirus. A leader of the protest group said, "That's not good enough. It should be parents' ... (click for more)

2 Killed, 1 Injured In Shooting Wednesday Night On Ridgeside Road

DeQuan Paris, 25, and LaRome Ridley, 20, were killed and a 29-year-old man was injured in a shooting on Ridgeside Road Wednesday evening. The two men who died are brothers. They have two other brothers. Their mother, Amanda Del “Rat” Paris, died last Dec. 3 at age 39. Chattanooga Police responded to the 3600 block of Ridgeside Road on a report of a person shot at approximately ... (click for more)

Opinion

What Is The Price Of Democracy?

Most United States citizens consider ourselves fortunate to live in a modern, mature democracy. We appreciate the great freedoms and abundant material things our democracy affords us. But while we all know the old adage that freedom is not free, neither is democracy. Our system depends on citizens’ being in ultimate control of the government through a written constitution with checks ... (click for more)

Roy Exum: That’s ‘Nonya’ Business

In the Sunday editions of the Chattanooga Times Free Press the editors will often include a feature on “fake news,” or “News That’s Not” but I don’t suspect them to include themselves in the junk report this weekend. The Chattanooga newspaper once again stumbled Thursday when they had an embarrassing lead story on the front page. The headline read, “DA accused of marrying employee, ... (click for more)