Consider Paying Down Your Mortgage

Tens of millions of Americans can earn a risk-free 3 to 6 percent annual return by paying down their mortgage. Can it get even better? Yes, it’s quite often tax-advantaged as well. If you have enough money in the bank or in investments to do it, consider the logic behind my claim and why you rarely hear this advice.

First, it’s important to understand that a mortgage is merely the opposite of a bond. When buying a bond or bond fund, you are lending money to corporations or governments that, in turn, pay you interest and your principal back, unless there is a default. Minimizing the risk of default is why bonds should be boring. When taking out a mortgage, you are paying a bank or other party principal and interest, which must be paid back irrespective of whether your house appreciates.

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Written By: Allan Roth

Published By: www.aarp.org

June 7, 2018 In: Current Affairs, Financial Articles Comments (None)