Kevin O'Leary Says You Should Pay Off Your Mortgage Quickly. Here's How
- Paying off a mortgage early can result in big savings and more financial freedom.
- With the right approach, you might manage to eliminate your housing debt sooner than expected.
- You can try refinancing your mortgage to a shorter term and pumping any extra cash you receive into it to pay it off sooner.
Shedding that debt could work to your benefit.
Many people sign a mortgage that they won't finish paying it off for another 30 years. But if you ask Shark Tank's Kevin O'Leary, it's best to pay off your mortgage as quickly as you can.
Now on the one hand, mortgage debt is generally considered the "good" kind to have. That's because it helps you build equity in an asset that can gain value over time. And so you'll often hear that you don't necessarily have to rush to pay off your home ahead of schedule.
On the other hand, mortgage debt is debt nonetheless. And O'Leary insists that shedding it quickly could work to your benefit in more ways than one.
First, there's savings on interest. The sooner you pay off your home, the less interest you pay on your mortgage.
Then there's the freedom of not having debt hanging over your head. As O'Leary said to CNBC, "You want to get rid of so you can start saving money and investing in your future."
Plus, you never know what curveballs life might throw at you. “Life is unpredictable," said O'Leary. "What happens if you’re laid off or incur unexpected expenses elsewhere? Your once-manageable mortgage is suddenly going to seem not-so-manageable.”
Clearly, O'Leary makes some compelling arguments for getting out of mortgage debt. And if you're eager to go that route, here are some strategies to employ.
1. Refinance a 30-year loan to a 15-year loan
If you have a 30-year mortgage, you can always make extra payments on it as money comes in. But it's not always easy to discipline yourself to do that. On the other hand, if you lock yourself into a 15-year loan, you'll effectively be forced to make those higher payments, whether you feel like doing so or not. Plus, with a 15-year mortgage, you're likely to snag a lower interest rate than you will on a 30-year loan, so there's that benefit, too.
Now, there is one caveat. You should only commit to a 30-year mortgage if you can truly afford the higher monthly payments. But if they fit into your budget, it may be worth doing.
2. Pump windfalls into your mortgage
You may come into extra money from time to time, whether it's a tax refund or a bonus from your employer. Putting that money into your mortgage could get it whittled down sooner without you having to sacrifice other luxuries in the process.
3. Go easy on renovations until your home is paid off
You may want to update your kitchen to nicer countertops, or treat yourself to new floors in your upstairs hallway. But if there's nothing technically wrong with your home, you may want to hold on renovations and work on paying off your mortgage first. The money you'd otherwise spend on updates could instead help chip away at your loan's principal.
Should you pay off your mortgage quickly?
In some cases, carrying a mortgage for its full term can make more sense than paying it off sooner -- such as if you have other goals you're trying to meet and you have a low interest rate on your home loan. But if you're interested in taking O'Leary's advice, then these tips could help you knock out that debt more quickly -- and enjoy the benefit of not having a monthly housing payment hanging over your head.
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