David Gomez is the president of Priority Mortgage Group in San Dimas, California. At Priority Mortgage, David Gomez helps clients understand their options in home loans.
If you are a homeowner with extra money in your budget, you may be considering paying off your mortgage. This may be beneficial because of the amount of money you pay in interest, which can be tens of thousands of dollars, depending on rates.
Conversely, eliminating interest from your financial obligations means you also lose the mortgage tax deduction. This can be particularly impactful for those in high tax brackets and those whose lost deduction would put them in a higher tax bracket. You also lose the opportunity to invest your extra cash, which can earn interest and provide you with a source of liquid assets.
For many mortgage holders, the decision to pay off or keep the loan ultimately comes down to the interest rate. If the rate is high, you may save a significant amount by paying off the mortgage early. But if the interest rate is low, you may want to invest your extra money elsewhere.