Finance & Loans

Paying down your mortgage debt

Many of us as home owners carry a mortgage as well as a home equity line of credit (HELOC). Some of us who were unfortunate due to many factors carry variable rate mortgages and HELOCs. As a result of housing market conditions, our rates are low at the moment and eventually will go up.

We need to plan to be debt free at the time of retirement especially paid off the mortgage by the retirement. For many of us, monthly mortgage payment is the largest expense among monthly bills to pay. So, it makes sense to plan and payoff the mortgage before retirement if you plan to stay in your home. By adding an extra amount to your monthly payment you can speed up the payoff of your mortgage. Better yet, if you can afford make an extra monthly payment or two every year in order to reduce the principal loan balance.

How about the HELOC? Since most HELOCs are also carrying a variable interest rate, monthly payment for the HELOC will go up when the interest rates eventually go up. So, if you inherit some money and have no other debt besides your mortgage and HELOC, it makes sense to pay off the HELOC first.