“It all depends on the intentions of the homeowner; if they’re staying in the home long-term it makes sense to pay it off over the course of the term,” Benny Loria, vice president of Amerimutual Mortgage, told Mortgage Professional America. “If they plan on only staying in the house short-term, say 5-10 years, they could benefit from taking advantage of low rates and paying the mortgage down quicker.”
Loria notes that those staying long-term can benefit from tax deductions on mortgage interest, which could then be used to purchase additional investments.
The Detroit News featured an article recently that profiled a number of Americans who have decided to pay off their mortgage in a matter of a few years.
In one case, a couple paid off their 30-year fixed-rate mortgage – which had an interest rate of 3.9% -- in less than three years of purchasing their home. The original loan amount was $204,000.
The advice to do so was given to them by a financial advisor, who determined paying off the mortgage would benefit them in the long-run more than investing money in other vehicles.
“And the next week, we went to the bank and paid it off,” Elisabeth thomas told The Detroit News. “Since we made the decision to pay off the mortgage, we’re very happy.”
Obviously, that tactic could benefit certain homeowners.
And it could also benefit mortgage originators. Clients who pay down the principal on a primary residence may be interested in purchasing subsequent properties to add to their investment portfolios; and who better to originate those deals than the player who offered sound financial advice that allowed the client to become mortgage free sooner than they had expected?
It’s a trend that could benefit originators in terms of repeat business, but is paying off a mortgage early the best bet for most clients?