If you recently received a large sum of cash from an inheritance and have enough to pay off your mortgage, should you use all this money to pay it off? This is a big question to ask, and it might be something you should seek professional advice about. There are pros and cons with using the cash you have to pay off your mortgage, and here are some of them.
The benefits of paying off your house
One of the questions a financial adviser may ask you is how well you are at managing your money. If you are a spender and do not think you could put this cash away and not touch it, paying off your home with the money is probably the smartest thing you could do. On the other hand, if you are good at managing your money and will not touch it, paying off your house might not be the best option.
If you do use this money to pay off your home, the main benefit is that you will own your house outright. You will no longer be tied to a lender, and you will own 100% of the equity in your home. This will reduce the expenses you have each month, and you may be able to save more of your paychecks because of it.
A financial adviser may also look at the interest rate on your loan as well as other debts you owe. These factors can also play a role in determining what the best option is for you.
The benefits of investing the money
While paying off your house can be a good option, there are some drawbacks you might want to consider. One of these is that you may lose a credit towards your property taxes, and this may cause you to have to pay higher taxes on your home.
The other thing to consider is that this money you have is money you could use to invest. If the interest rate on your house is really low, investing your money in this house might not be the most lucrative option you have. With a good financial adviser, you might be able to find relatively safe investment options that provide a better return on your money.
If you are in this situation and are not sure what the best route to take is, contact a financial adviser, such as those found at Harwood Financial Group, to schedule an appointment to discuss your situation.