While it may seem beneficial to pay off your mortgage in full, there are some disadvantages to doing so.
Benefits of Not Paying Off Your Mortgage in Full
One of the biggest reasons people don’t pay off their mortgage in full is access to their home loan account. These funds allow you to:
- Renovate your home and increase its value
- Purchase an investment property or a new home
- Allows you to claim certain tax benefits.
- Consolidate your debts with a cheaper interest rate than a personal loan or credit card
- Build your super, helping you to save for retirement
In addition, your home loan account is usually the cheapest credit you can get, the mortgage repayments for rental properties are tax-deductible, and the bank will hold on to the property title for you.
Risks of Not Paying off Your Mortgage in Full
While there are many benefits of keeping your mortgage account open, there are some risks you need to be aware of:
- Not closing your account will cause you to pay more interest over the loan term.
- You’ll still have mortgage repayments to make, and if financial difficulty arises, you may not be able to make these repayments.
- You may have to pay a small annual fee for the account features, such as an offset account, redraw facilities, and other ongoing costs.
- Keeping the account open may tempt you to access the equity and redraw the extra repayments, which is more money you have to pay off.
If you are almost done repaying your mortgage and want to know if you should pay off the rest, the experts at Mortgage House can help you weigh the pros and cons based on your financial situation.
