To Prepay or Not To Prepay - That is the question...

Alright all you mortgage reps out there, I know you have an opinion on this matter, so lets hear it!  :)

  Some Prepaying Advantages:

• Guaranteed Returns:  If you have a fixed-interest mortgage, you can always count on the return of your prepayment investment to remain constant.  If you have the extra funds to spare, but think the market is too risky, it may be worthwhile to apply that money to your mortgage.
• Cancel Your Private Mortgage Insurance (PMI):  If you had to borrow more than 80% of your home's appraised value for your mortgage, then you're probably paying private mortgage insurance, an extra fee that could cost you as much as $100 a month.  By making extra payments, you can obtain the required 20% equity in your home and convince your lender to drop the PMI.
• Peace of Mind:  Paying off a mortgage is a long-term financial goal for some homeowners, and for them, that peace of mind carries an enormous emotional value.  Just make sure that your high-interest debt and retirement savings are taken care of, too.
• Retirement Beckons:  Paying off your mortgage early can mean a big reduction in living expenses after you're retired.  And because you won't be forced to tap into your retirement savings in order to make monthly housing payments, you might be able to live a little larger, or retire a little earlier.

  How Not Prepaying Could Be Beneficial: 

• Market Return:  If you can get a better return, and you're willing to take a long-term ride on the market, it may be more profitable to invest in an index fund.
• Interest Tax Deduction:  While making extra payments reduces principal on your mortgage, it also reduces the amount of interest you can claim on as a tax deduction.  If you're in a high tax bracket, being able to use this deduction to lower your taxes might be motivation to invest your extra cash elsewhere.
• Prepayment Penalties:  Before increasing your monthly payment amount, make sure your mortgage does not have any prepayment penalties.  While most fixed rate mortgages don't carry such penalties, they may be attached to adjustable rate mortgages.  Talk to your lender for details.

Please consult your mortgage representative before making any decisions regarding your home mortgage.

The Moore Team

480-545-1043

www.tonymoore.com