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Wednesday April 28, 2021

When it comes to debt, we generally assume that paying it off quickly is the best practice. While this is true in general, there are strong arguments against paying down your mortgage quickly. Today, we will briefly address why you wouldn’t want to to pay your mortgage down too quickly.

While debts are generally a bad thing, the United States treats mortgages as sacrosanct, and provides a plethora of benefits related to homeownership; tax breaks on mortgage interest, for example. If you purchased your home prior to December 15, 2017, you could deduct up to $1M in interest; the number is $500k if you purchased after December 15, 2017. As long as you have a loan, you are eligible for those tax breaks.

Next, there is the concept of opportunity cost – “the loss of potential gain from other alternatives when one alternative is chosen.” You have a finite amount of money and dedicating to it paying down your mortgage means you are foregoing other investment opportunities. While the Chernov Team is not an investment firm, it is important to consider what opportunities you miss by dedicating all your assets to paying off a mortgage.

Finally, a counter-intuitive reason not to pay off your mortgage too quickly is that you can’t take out a home equity line of credit (“HELOC”) unless you have a mortgage. As we mentioned previously, you can deduct up to $750,000 in interest provided you use your HELOC to “buy, build, or improve a property.”

At the Chernov Team we understand that knowledge is power, and knowledge of the benefits of maintaining a home loan is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.


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