What Are the Downsides of Paying off The Clients House?

When a mortgage broker is approached by their clients inquiring about the downsides of paying off their home loan, the broker should be able to successfully explain the following disadvantages and the reasons behind them:

• Clients can lose their potential of receiving mortgage interest tax deductions which can increase their amounts of taxable income, resulting in higher taxes being paid
• Clients may be required to pay mortgage prepayment penalties, which are fees charged by their mortgage brokers for paying off a mortgage too early
• Clients can damage their credit scores due to the loss of credit by paying off a mortgage in full

Client who decided to not pay their mortgage off in full will still have access to their home loan funds and receive the following benefits:

• The ability to renovate a home, resulting in an increased property value
• The ability to build superannuation, resulting in financial benefits for retirement
• The potential to consolidate personal debts with lower interest rates
• The ability to claim various tax benefits
• The potential to purchase an investment property or new home

If a client is interested in decreasing the amount being repaid on a home loan and the time it takes to pay the loan in full, making extra mortgage repayments in addition to monthly mortgage repayments is a great option. 

Another way for clients to decrease the time and money being spent on a home loan is by opening up a mortgage offset account. A mortgage offset account is a type of transactional bank account that lets clients make deposits that benefit their home loan balance through offsetting.