Paying Off Debt

During these economic times it is tempting to think of paying off those debts. Particularly the number one monster, the home mortgage. You will undoubtedly get major benefits in paying off your mortgage debt and one of these is peace of mind. It is great to get a good nights sleep knowing you are debt free. However, paying off the home mortgage may not be the number one priority because in many cases it is the best source of low interest borrowing. In fact if you pay it off and then find you need to borrow again you may find it difficult to get another loan and if you are able to get another one you may not get it on the same good terms as your current loan.

Some of your other debt may be a different story. High interest loans should be the first ones to pay off. These are typically credit card debt, hire purchase and car loans. Pay these off or if they are very large you could even consider paying them off by borrowing more on your home mortgage. It may surprise you to see how much you save by using cheaper mortgage interest rates. It goes without saying that once you pay off those credit cards then never use them again to build up debt. Use them if you must, but pay them off completely every month.
Once you have paid off your larger debts then start into the mortgage but just get it to a comfortable level and then you might like to consider some other forms of investment. It may not always be wise to put all your investment eggs into one basket. Diversification has always been a wise decision when it comes to investing. After all, owning your own home is just another form of investing and by paying off the mortgage completely you are putting all your assets into your real estate investment. So consider taking advantage of some of that cheap interest mortgage money to invest safely in other forms of investment.

In the end it is always a personal decision but give some time to thinking things through before simply paying off the mortgage. You need to be comfortable with the direction you choose but certainly the first move should be to eliminate high interest loans. Having a little low interest debt may be beneficial in the long term.

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