If you’re able to pay off your mortgage early, should you do it?
It seems like a simple decision, but there are actually many sides to the story. CNBC asked several advisors to weigh in, and they came up with a number of pros and cons.
When it’s wise to pay it off
“I recently talked my own mother into paying cash for a new home, as she is entering retirement,” said Elizabeth Grahsl, certified financial planner and vice president at Prosperity Bank. “The downsides are that she has to recognize a fair amount of capital gains to sell enough assets to pay for the home outright … [and] she’ll lose the mortgage-interest tax deduction.”
But the downsides are nothing compared to the interest and closing costs she’ll save, said Grahsl, compared to even a 15-year mortgage.
“And because her retirement expenses will be so much lower without a mortgage, she won’t need to withdraw as much from her portfolio for income,” she added. “That will save her income taxes and capital gains over the coming decades, as well as enable her to retire with a lower portfolio value.”
Grahsl generally recommends that people near or in retirement pay down their mortgages rather than invest more in stocks or bonds. While mortgage interest rates are low, she said, the market is near all-time highs, and both stocks and bonds seem overvalued. More here.