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Creating a financial plan

 

A guide to determining if paying off your mortgage is the best financial decision.

If  you are like most people the idea of carrying debt is something that philosophically does not feel good. So how do you determine if you should be pay off your mortgage? First it would be important to make sure that you presently do not have any debts other than your mortgage, especially if they are high interest credit cards. There are a couple of key points to consider when looking at paying off your mortgage, your true cost of borrowing and your rate of return on your other financial investments:

To better explain the first item, you need to find out if you are presently itemizing your income taxes. If you are itemizing your taxes, you are writing off a portion of your mortgage interest every year and effectively lowering the rate of which you are borrowing money.

The second major point is the idea of paying of debt that has a lower interest rate than money you have invested. For example, if your mortgage rate is 6% and you historically are earning 9% on your retirement accounts, you consistently have a 3% advantage on allowing your money to continue to grow and not trying to pay down your mortgage early.

If you are considering trying to pay off your mortgage early or wondering if you should potentially shorten your loan term then it would be beneficial to review your entire financial situation with a professional to set up a plan for your unique situation.

12-08-2007 ? LoanNetwork.com

 

 

 

 

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