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You have the cash…Should you pay off your mortgage in full, in the midst, of COVID-19?

You have the cash…Should you pay off your mortgage in full, in the midst, of COVID-19?

Senior man with cash in hand at a computer paying off his mortgageThe year 2020, has been a whirlwind. What started off for many as the year they planned to level up their finances and get ahead in building that nest egg for retirement, COVID-19 hit us all out of nowhere. We’ve watched the numbers go up and down, rates drop, real estate prices drop and small businesses close up left and right. Just recently we’ve finally seen the number of COVID-19 cases decrease dramatically and businesses are starting to reopen their doors again to a new normal. Local businesses are starting to hire again, though large corporations are looking at layoffs again and with all the changes happening around you, you’re likely thinking about your mortgage. Whether you’ve just bought your first home, you’re looking to buy your first home, or your mortgage is up for renewal, many questions are floating around. Should you break your mortgage to secure a better rate while rates are so low? Should you wait to buy a new home because the prices might drop even more?

More recently though, I’ve had a few clients ask, if I have the cash available, should I pay my mortgage off in full, so I don’t have to worry about it?

For some paying off their mortgage is years away, if they even see that success on the horizon yet. It’s truly a moment of your financial life worth celebrating. Crack open the champagne, make a toast and never pay a mortgage payment again! However, being in the midst of uncertain financial times, does it make sense to pay off the mortgage or keep that nest egg in case of future unforeseen financial woes compliments of this pandemic? To help you make this decision for yourself I would ask that you think about your personal answers to these questions before making that final payment.

  • If I take the savings I have and use them to pay off my mortgage, will I have anything left as an emergency fund?
  • If I pay off my mortgage with those savings, will it impact my investments long term?
  • If I use that extra money to pay off our existing mortgage and I get laid off in the near future how will I manage on a month to month basis?
  • If I don’t use that money to pay off my mortgage and keep it as a safety net does that make me feel more secure in these uncertain times?
  • If I don’t use that money to pay off my mortgage is it collecting interest or dividends to grow my financial wealth?
  • If I don’t use that money to pay off my mortgage can I use it to pay off other debts with higher interest rates than my mortgage?

Financial decisions aren’t easy in the best of times, let alone during a pandemic like this one. Although it seems like COVID-19, is dare I say, improving dramatically in terms of going away, we can’t be naïve in thinking it’s soon to be over just yet. There could be a second wave. There could be big economic changes we haven’t thought of yet. And, although you can’t live your life in fear of what is yet to come, you can do whatever possible to prepare yourself to become flexible, agile and ready for the next iteration of impact on your finances. This is why now, more than ever, it’s important to consult a financial partner like myself, Darren Robinson, so we can look at your financial picture as a whole not just as one piece of the puzzle. I can help point out areas in your financial plan that perhaps you haven’t yet thought of, or that might need a little more support. Perhaps I can confirm that yes, it does make sense to use that nest egg to pay off your mortgage in full. If you’ve got questions, and are looking for a little insight to help you make big financial decisions whether it be in regards to your mortgage, your investments, or your long term life insurance plans; give me a call at 705-315-0516 and let’s talk it through. I’m here to help in any way I can, and have many new tools in place to offer you a safe, virtual experience to get the job done.

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