Should I pay off my mortgage or buy a rental property?
If you’ve received lump some cash or saved a good amount of money over the years, it can be tempting to pay off the mortgage loan early. Please note that to pay or not pay off the mortgage early being a good decision depends on your financial circumstances, interest rate, and how close you are to retirement. If you need assistance regarding mortgage or rental property, please reach out to our team of specialists today. We will be happy to help you.
How does a mortgage loan work?
A mortgage is a loan borrowed for the purchase of a property. The borrower signs the documents and must repay the mortgage lender until the loan is paid off. The loan term is 20-30 years. The financial institution pays the seller the full price and charges the borrower interest on the loan balance. Some homeowners may choose to pay off their mortgage early, this decision can be wise for retirees who want to eliminate their debt as they will not have an employment income for a longer time. It can also be beneficial for those who want to have more cash for other expenses than to pay off their mortgage. However, this not be a great choice in certain situations, it is always best to seek advice and guidance of an expert before you proceed.
Earning passive income
Investing in rental property is a great way to earn passive income. It provides you a steady cash flow and make monthly profit and can also be used to pay for other bills. Over the years, renting out a property can help you accumulate enough money to pay off the mortgage. It will help you increase your monthly cash flow by a significant amount.
Advantages of paying off rental property
Equity
Increased cash flow
Offers rental flexibility
Provides you eviction protection
Disadvantages of paying off rental property
No more access to a large amount of money
Lower liquidity
Higher borrowing costs
Limited leverage and velocity
Key takeaways
If you’ve received a large sum of cash, it may be tempting to pay off the mortgage loan quickly
The success of paying off depends on your (borrower’s) financial situation, interest rate, and closeness to retirement.
Take factors such as tax-deductibility of mortgage interest and low loan rates into consideration.
Investing money can generate returns, but markets come with the risk of losses.
If you need advice regarding mortgage or rental property, please call GNE Mortgages now.
