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Q: We currently have a 30-year fixed-rate mortgage at 5.75%. We built our home about 2 years ago and plan on staying there forever. We owe $198,500 on the mortgage and our monthly payment of principal and interest is $1,194. We also pay an extra 100.00 per month towards the principal in order to pay off the mortgage early.

My husband and I are 40 and 37 years old, respectively and are wondering if an interest-only loan is something that would benefit us. What would the advantages and disadvantages be for our financial situation?

 

Q: We currently have a 30-year fixed-rate mortgage at 5.75%. We built our home about 2 years ago and plan on staying there forever. We owe $198,500 on the mortgage and our monthly payment of principal and interest is $1,194. We also pay an extra 100.00 per month towards the principal in order to pay off the mortgage early.

My husband and I are 40 and 37 years old, respectively and are wondering if an interest-only loan is something that would benefit us. What would the advantages and disadvantages be for our financial situation?

A: This depends on your goals. If your goal is to pay off your mortgage faster, then your current mortgage may be fine. However, if you're not fully contributing to your retirement plan or are carrying other debts, then paying off your mortgage early may not be your best financial decision. Because mortgage interest is usually tax-deductible, it may be wiser to pay down high-interest debt or contribute more toward your retirement. Let your home and your mortgage work for you.

Because you plan on owning your home for a long period of time, a 30-year fixed-rate mortgage makes sense. By refinancing to a 30-year interest-only loan, you retain the security of a low interest rate for the life of the loan and gain the financial flexibility to make interest-only payments when you need to. Use this flexibility to deal with the unexpected, or pay down high-interest debt - that's putting your mortgage to work for you.

Finding a mortgage that properly fits your lifestyle is always your best decision.

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