Dealing With a Mortgage and I Have Cash

So many homeowners have the goal to pay off their home mortgage early but there some things you need to consider before you take that step.

First in my book is cash. Never run your savings low to pay off your mortgage. Using the majority of your cash to pay off a mortgage is never a good idea. It can take years to build up or a windfall to obtain but once it is spent you cannot get it back. Things happen in life we do not plan on or think will ever happen but they do, and if the situation requires cash you will have it on hand instead of tied up in your home mortgage.

Some people plan on paying down their mortgage while having in mind a cash out loan will be there if needed. Doing a cash out loan on your home mortgage has more than one pitfall. When you do cash out on your house, the lender always charges points. So in other words you are paying an upfront fee to access your own money. This does not include other closing costs like an appraisal, title search and other fees. Also, you are paying interest on your loan so now you are back right where you started but still no cash on hand. Even worse, what happens if you lose your job and need your cash? Now you do not qualify for a loan so you can't access you money.

The housing market today is enough to make anyone be careful about paying off the mortgage. If you live in area where housing prices are not stable, you may never get all of your cash back out of your home. Some people pay off their home then later find the value dropped 18% or more. That can be devastating! Make sure to get a current value before making that decision. I would recommend contacting a local realtor. They will be happy to look at your market area and run some comparative properties at no charge. Also, always include checking with your local property taxing authority. If your property taxes recently went down then so did the value of your home. If the realtor says your area has a large number of homes for sale, that will soften the value and the lender takes those factors into consideration when determining the amount they will offer to loan. If you have other debt like credit cards or a car loan pay those off first. These other type debts normally have a higher interest rate and you cannot deduct the expense on your tax return. Many states allow your home loan interest to be tax deductible which can save you hundreds of dollars a year.

If you are in a good cash position and your credit card debt is small try paying your home mortgage down in stages. This allows you maintain a level of cash on hand and still reduces your overall note. Some lenders will allow you to modify your loan so a large reduction will also reduce your monthly note. Once that is done, put the difference into your saving account. You will be on the way to living a debt free life with cash in the bank.