4 Questions to Answer Before Paying Off Your Mortgage Early

Paying off your mortgage early is a relatively risk-free move, which is not something that many other investments can offer. That being said, there are opportunity costs associated with paying off your mortgage early.  For instance, paying off your mortgage quickly while not having enough “rainy day” funds or exposing yourself to other risk may not be worth it, especially if you already have a good interest rate locked in. Or maybe getting rid of that 3 percent to 4 percent interest sounds good, except maybe you could have made 7 percent to 8 percent interest by investing it elsewhere. It’s a tricky subject, but here are four questions you should answer before deciding to pay off your mortgage early. 1) How much principle remains? This is key in understanding how much you will pay and for how long during an accelerated pay schedule. Generally, it is a good idea to make an extra payment on your mortgage whenever it makes sense financially, but if you have 28 years left on your mortgage, trying to pay it off in 12 may not be as easy as it sounds. On the other hand, if you only have 9 years left on your current schedule, it is probably easier than it sounds. 2) What do your other investments look like? This is a follow-up to question No. 1. A home is one of the largest investments most people will make. But what about the rest of your portfolio? If you are sitting pretty on a couple of good stocks/investment groups and confident in their returns, you may decide investing in stocks, bonds, real estate or other capital is better than paying off a low-interest loan early. 3) What other debt do you have? If you have credit card debt which is hitting you with a higher monthly interest rate than your home – and add non-tax-deductible interest on top of that – you’ll probably want to focus on paying that down instead. Or if you have children who will be entering college in a few years and you would like to put more money to their college fund, this may be a better use of money than paying off your mortgage early. 4) What are your upcoming life plans? Do you plan on moving in a few years? What about having a child? Or maybe you are three years into a 30-year mortgage but only 10 years away from retirement. Take a look at how much you will spend short-term vs. save long-term and how that plays into your future life plans. For a closer look at what making extra payments on your mortgage will mean to your bottom line, fill out this Early Mortgage Payoff Calculator and decide what your best course of action is. If you still have questions, feel free to call me, your Central Indiana Prudential Realtor, at 317-442-9786 and I can assist you in your queries.

What It Take to Compete as a Buyer In today's Market

The real estate market in Central Indiana has settled firmly into seller’s market territory.
 

The newest report from the Metropolitan Indianapolis Board of REALTORS notes the increased activity on the housing market is creating somewhat of a frenzy, with “buyers eager for available properties compet(ing) like they haven’t in years.”

For sellers, this is a great thing.

But for buyers, it might take a bit more effort than in the previous few years to land the home you’re longing for. Here are a few tips to help buyers compete in this seller’s market:

1. Know What You’re Looking For. Determine your needs and your wants in a potential home, all before you’ve even started looking. This way, the moment new homes come on the market, you (and your agent) will know which ones are up for consideration and which ones aren’t worth pursuing, all based on your predetermined parameters.
2. Get Financing Squared Away. Plain and simple: Unless you plan to pay with cash, get preapproved for a loan. Otherwise, you’ll get left in the dust by buyers who have proof that they have the means to purchase the home in question, all while you’re still working to get finances squared away. Money talks; give sellers your word with a loan preapproval.
3. Prepare Yourself For A Bidding War. Be prepared to be outbid by other buyers competing for the same home. You can combat this issue by shopping for homes below your price range; in the case that a bidding war ensues, you’ll be able to up your offer and still stay within your budget. Note that if you’re only shopping for homes at the top of your price range, you’ll need to mentally prepare yourself for disappointment if you can’t keep up with higher offers from competing buyers.
4. Be Prepared To Make Decisions Quickly. In this market, homes change hands in short order. If you’re serious about a particular property, be ready to make decisions regarding purchase quickly. Tarry, and the home will likely get picked up by someone else in no time.

If you or someone you know is planning to buy or put their home on the market, contact me today, so I can get you started on this process.  Homes are moving fast and it's a great time to be a seller.