Some would argue that the interest savings are the best reason to pre-pay your mortgage, but objective financial analysis would reveal that you are better off having a mortgage even if you could pay cash for a house because of the tax benefits. By pre-paying your mortgage, you are killing off your best tax deduction.
Your home equity is not a good investment as it has a rate of return of zero, it is at risk and it is illiquid. If you want to read a good book on the subject of equity management, check out Missed Fortune by Douglas Andrew.
Take the money that you would have applied to the mortgage and invest it in something tax deferred or tax free to build wealth. Enjoy the tax benefits of the mortgage interest deduction and grow your money while you continue to live there.
Good luck.
What are the benefits of prepaying my mortgage if I know I will sell the house before I actually pay it off?
Because like with any property, it builds value over the years, so say you paid $300,000 for it today, in 3 years time it may be worth $400,000. Paying the mortgage does not mean you will only make the amount you pay off it back, you will make a lot more off it, plus, what you have paid off it.
By paying your mortgage you are securing your investment, if you were paying rent, you would be securing somebody Else's investment, what would you rather?
1 Mainly it would be a form of forced savings.
If you are not very good and saving money this would put it where it would be more difficult to get it out and spend it.
#2 Your remaining payments before you sell would be more principal and less interest. So the thing begins to snowball. But this effect is not likely to really be a big deal withing 5 years. It would gradually take effect and would be a big deal much later than that.
There aren't any really unless you're upside down on your mortgage. Keep your money in savings. Even if you are upside down when you go to sell, at least you'll have savings to cover any money you might have to go to closing with.
You will have more equity in the house by the time you sell it and still owe less to the bank when you do sell it. You don't have to go to the end of the loan to benefit from less interest paid.
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