Roadblock #6 - Mortgages of Less than 30 years
Have you ever felt that you should pay off your house ASAP?
It’s important to someday have a house that’s free and clear, but to approach that in a way that if the world changes its mind or the unforeseen happens, you’re also protected from the hardships that come along with it.
What if your house payment is 35% of your gross income?
Then the chances are you’re living on debt. You’re probably not saving enough to keep pace with the Real Cost of Living™ and you might have holes in your protection portfolio. It’s important that your home ownership decisions are keeping up with your overall approach to Financial Balance®. What compounds home ownership however, is the type of mortgage and the method with which you use to pay off your house.
Should you choose a 15 year or 30 year mortgage?
Currently, mortgage rates are at an alltime low and you can finance a home for 3-4%. You do not have to accelerate the payoff of your mortgage. By paying it off in 15 years versus choosing a 30 year option, or by making voluntary additional payments, you could be missing out on other financial opportunities.
Say for example, you are able to save into a mutual fund that earns 10-12%. If you thought you could really earn 10 to 12% on your money, the last thing you would want to do would be to quickly pay off a mortgage with an additional, higher payment. You’d be better off having the lowest mortgage payment possible, so that you could put the most amount possible into your favorite mutual fund.
What else should you do to slow down your payments?
The accelerated payoff of your home mortgage also stands in the way of other financial priorities that you need to consider. While you’re rapidly paying
off your house, have you thought what would happen to your family if any of these ‘if ’s’ occurred?
- What happens if you die?
- What happens if you could never work again due to a permanent disability?
- What would happen if you’re downsized, and lose your job for a year?
Having an ample amount of short-term liquidity and being properly protected are simply more important financial priorities than the paying off of your house.
Securities products and advisory services offered through Park Avenue Securities LLC (PAS), member FINRA, SIPC. Guardian does not issue nor advise for mortgages. The Living Balance Sheet® (LBS) and the LBS Logo are registered service marks of The Guardian Life Insurance Company of America (Guardian), New York, NY. © Copyright 2005-2019 Guardian.
Pub7344 2019-85506 Exp. 09/21