Most people dream of owning their own home, but is paying it off really inHome Pay Off your best interests?

If not, why wouldn’t it be? Isn’t the ideal situation to be debt free and not have to make any payments?

The truth of the matter may surprise you.

The worst thing you can do financially is to pay off your home. The tax benefits alone of having a mortgage are worth keeping one around, but they extend far beyond that.

Higher Tax Bracket

Consider what happens when you pay off your home. You are immediately in a higher tax bracket because your income is seemingly higher.

Because you’re not making this huge payment every month, and now own a large piece of valuable property, your taxes are higher.

You no longer have the tax breaks associated with a mortgage payment either and this means fewer deductions at the end of the year. With more money in your pocket and a higher income, you’re likely to start paying double in taxes.

Low Interest Loans

When you borrow against the equity in your home, it is literally the cheapest money you’ll ever use. As you compare the cost of borrowing from a credit card or borrowing from your bank with your home as collateral, the interest rates and the fees are both lower.

You can use this money to pay off credit card bills, student loans and medical bills and still pay less than if you had used a different type of loan. Having a mortgage means you have access to funds that would normally be extremely expensive.

Once you pay your home off with the bank, this particular type of loan will no longer be open to you. You will have the deed in hand and the application process will be different.

What’s the Solution?

The solution to maintaining all of these benefits is to only agree to a mortgage you can afford. This removes the possibility that you’ll lose your home later on because of non-payment and also provides for any change of income.

You can always choose to move or sell the property to someone else, but in the meantime, you get all the positive benefits of purchasing real estatepaid_off_house.

Even though we’re raised to think we should pay off our homes, we must get used to the new money market. Once you understand this, your money will go further and you’ll earn more over time.

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This is filed under Financing.

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