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Should You Make Extra Mortgage
Payments or Boost Your Investments?
E
very month, you pay your mortgage. And, depending
on your circumstances, you may be able to afford to
put in additional payments – perhaps sizable ones.
But should you? Or, if you really have the extra money,
should you invest it?
Initially, you might think it would be quite nice to rid
yourself of that mortgage sooner, rather than later. But is it
really the burden it seems?
Actually, you get some real benefits from a mortgage.
It certainly provides something of great value to you –
your home. If you got your mortgage – or refinanced
your home – within the past decade or so, you are
borrowing money at a pretty favorable interest rate, by
historical standards. And even assuming a mild rate of
inflation, such as we’ve had for the past several years,
you’ll essentially be paying off your mortgage with
cheaper and cheaper dollars over time. Plus, your interest
payments may well be tax deductible. (The new tax laws
limit deductions on new mortgages of $750,000 or more.
For questions on your specific situation, consult your tax
professional.)
So, given these advantages, an argument could be
made that you should be in no hurry to pay off your
mortgage. Still, you might be tempted to make the extra
payments because you’ll be building home equity. After
all, isn’t this equity valuable? It is – to a degree. The larger
your home equity, the more money you’ll get to keep
when you eventually sell your home.
Also, if you were to experience a temporary job loss or
some other financial emergency, your home equity might
not help you much; if you’re not working, you could even
have trouble getting a home equity loan. Conversely,
your investment portfolio can offer you greater liquidity,
depending on your specific investments. Most investment
vehicles, such as stocks and bonds, generally can be sold
quickly, without much difficulty. (Keep in mind, though,
that if you were forced to sell investments when their price
was down, you could take a loss on the sale.)
Clearly, you could gain some advantages by using any
extra money to invest, rather than paying down your
mortgage. Nonetheless, you may simply get emotional
and psychological satisfaction by speeding your progress
toward the day when your house is paid off – and that
type of satisfaction certainly has value. You’ll need to
weigh these intangible factors carefully in deciding
whether to increase your investments or make extra
mortgage payments – because, ultimately, you need to
feel that you’re doing the right thing, for the right reasons.
This article was written by Edward Jones for use by your local
Edward Jones Financial Advisor.
But in the meantime, that home equity may be less
useful than you might imagine. For one thing, just
building more equity won’t make your home more
valuable – it will rise or fall in value along with whatever’s
happening in the housing market. By contrast, you
could take the extra money and buy more shares in an
investment such as stocks – and the more shares you own,
the more valuable your investment will be if the price per
share rises.
Matt
Dudkowski,
AAMS®
Matt
Dudkowski,
AAMS® | Financial
Advisor | 1007 Mt Royal Blvd. Pittsburgh, PA 15223 | 412.487.3300
Financial Advisor
[email protected]
| www.edwardjones.com
.
Matt
Dudkowski
has been
1007
Mt Royal
Blvd a financial advisor with Edward Jones since 2002, serving individual investors in
the
Pittsburgh area
from
his Shaler Township office. In January of 2015, Dudkowski accepted an invitation
Pittsburgh,
PA
15223
to 412-487-3300
become a limited partner with the firm.
Since joining Edward Jones, Dudkowski has obtained the professional designation of AAMS®. Prior to Edward
Jones, Dudkowski, as a CPA, worked at the H.J. Heinz Company, and at Ernst & Young LLP.
He currently serves on the board of directors for Keystone Wellness Programs, a local nonprofit organization.
A native of Butler County and a graduate of the University
of Notre Dame, Dudkowski resides in Gibsonia with his wife,
two sons and daughter.
Matt Dudkowski has been a financial advisor with Edward Jones since
2002, serving individual investors in the Pittsburgh area from his Shaler
Township office. In January of 2015, Dudkowski accepted an invitation to
shaler ❘ Summer 2018
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