I was recently interviewed for an article done by Betty-Lin Fisher, Business Writer with the Akron Beacon Journal, about whether bi-weekly payment plans and mortgage prepayments in general are a good thing. She wrote:
Claytor and Kevin Kroskey, a certified financial planner and owner of True Wealth Design in Fairlawn, both agreed with McBride that paying off other high debt and funding other accounts should come before prepaying a mortgage.
Another option is to do a little more each month. Claytor and Kroskey said they both round up their mortgage payments to add a little extra to their principal.
''By and large, paying down the house is a good idea,'' said Kroskey.
But there is a caveat, he said, where he sees people making mistakes. Often, as people are getting closer to retirement and if they haven't done a really good job of saving, they might think, ''I have to pay off this mortgage before I get into retirement. It's what Americans are supposed to do,'' said Kroskey.
''If they're aggressively paying down that mortgage while they're forsaking the 401k,'' that's not good, he said.
As with virtually all aspects of personal financial planning, whether something is good or bad can usually be answered with 'it depends.' It depends upon the unique circumstances of each client. Virtually nothing is axiomatic.
Some clients should pay down their debt while others have a strategic choice to use today's low interest rates and the tax favorability of mortgage and/or investment interest and incorporate these tools into their overall plan. They key is to have a plan and evaluate the pros and cons of the decision in the context of your plan. Otherwise, it's easy to have tunnel vision and rely upon rules of thumb that may not be properly suited or optimal for your situation.
You can read the full article here.
Kevin Kroskey, CFP, MBA
Claytor and Kevin Kroskey, a certified financial planner and owner of True Wealth Design in Fairlawn, both agreed with McBride that paying off other high debt and funding other accounts should come before prepaying a mortgage.
Another option is to do a little more each month. Claytor and Kroskey said they both round up their mortgage payments to add a little extra to their principal.
''By and large, paying down the house is a good idea,'' said Kroskey.
But there is a caveat, he said, where he sees people making mistakes. Often, as people are getting closer to retirement and if they haven't done a really good job of saving, they might think, ''I have to pay off this mortgage before I get into retirement. It's what Americans are supposed to do,'' said Kroskey.
''If they're aggressively paying down that mortgage while they're forsaking the 401k,'' that's not good, he said.
As with virtually all aspects of personal financial planning, whether something is good or bad can usually be answered with 'it depends.' It depends upon the unique circumstances of each client. Virtually nothing is axiomatic.
Some clients should pay down their debt while others have a strategic choice to use today's low interest rates and the tax favorability of mortgage and/or investment interest and incorporate these tools into their overall plan. They key is to have a plan and evaluate the pros and cons of the decision in the context of your plan. Otherwise, it's easy to have tunnel vision and rely upon rules of thumb that may not be properly suited or optimal for your situation.
You can read the full article here.
Kevin Kroskey, CFP, MBA