5. It’s financially sophisticated. Especially if you are in your 20s, most of your friends will still be throwing away their money on rent when they could be investing it in a house home. Seriously. You get to tell them how your home is appreciating at 5% while the interest rate is under 3%, returning you a safe and easy 2% annual rate of return. If you really want to blow them away, let them know about the great tax benefits of having a mortgage.
4. You’re supporting a good cause. Bankers need to eat too.
3. Tax benefits. You get an easy tax deduction without the added cost of loan repayment. This can be further enhanced with an adjustable rate mortgage (aka an ARM). After the initial fixed rate period, rates adjust based on market conditions. Since rates are historically low right now this will almost certainly mean the adjustment will be to a higher rate. If you accidentally pay part of the principal on your loan (don’t feel bad, I’ve done it too) this rising interest rate can help to protect your tax deduction. Ignore those pesky math nerds who claim the mortgage deduction doesn’t make up for the interest costs, they’re just mad because the cost of suspenders is up.
2. It’s more affordable. You can get a interest only, adjustable rate, mortgage for much less than a repayment type (principal and interest) mortgage. Especially on shorter term loans the principal payment can be more than half of your total payment!!! Why pay this unnecessary expense if you don’t have to?
1. Rich people do it. Nuff said.
There you have it, 5 compelling reasons not to pay principal on your mortgage. Did I miss any?
