Is it always best to pay your mortgage quickly?

By Gerv Tacadena

The biggest goal of any homeowner is to finish paying off their mortgage, but a financial planner said it is also crucial to consider short-term financial commitments.

In a think piece in Money Sense, financial planner Heather Franklin said financial goal-setting should be fluid when considering mortgages and other commitments.

"While mortgage debt is extremely important to address, when we look at it within the bigger financial picture of your household's goals, we must also consider shorter-term goals that need to be addressed ahead of longer-term goals such as early retirement or paying off your mortgage," she said.

Franklin said this is important, especially for parents who would like to start saving in a Registered Education Savings Plan (RESP) for the education of their children.

"It's not out of the ordinary for couples to discover they have several financial goals to juggle over a few key years," she said.

Also read: 4 reasons to refinance your mortgage

In such cases, she said it is likely a "better savings goal" for families to top up their RESPs than paying off their mortgages quickly, especially if they have been diligent with their home-loan repayments.

"Chances are very likely that your house will appreciate in value over the next few years and this will be adding to your retirement nest egg — even if you hold off on a few years' worth of bigger mortgage payments," she said.

Some might think that paying off their mortgage as quickly as possible should be a priority given the likelihood of rising mortgage rates. However, Franklin said during these times, it would be practical to switch to a fixed mortgage rate to ensure stability.

"Having the assurance that your rate stays at a low interest rate will give you financial peace of mind and allow you to plan long-term with more accuracy," she said.

Franklin, however, warned about using home equity when dealing with other financial commitments such as university costs.

"These lines of credit can be fraught with problems — most notably is the potential to rack up more debt than necessary, as they can encourage people to live beyond their means," she said.

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