Pay Off Your Mortgage or Structure a Little More?

July 27, 2016

The settlement of your personal injury claim has been concluded. You've chosen to structure a portion of the settlement proceeds, but how much of your settlement should you structure and how much should you take in cash?

Settling higher interest debt (credit cards, etc.) is first and foremost, but what about your mortgage?  Should you pay off your mortgage?

Here are a few things to consider when deciding whether to pay down your mortgage:

1. Mortgage Rates

With mortgage rates at all-time lows, it may make more sense to design a structure which would allow you to pay down your mortgage gradually, out of your structure payments, with additional monthly income to spare.  Be aware that there are often potential penalties for mortgage pre-payments (often three months' interest), which should be taken into account in making this decision.

If you are concerned about mortgage rates rising in the future, a great way to protect yourself against increasing mortgage rates is to build a lump sum into your structure that pays you in tax-free dollars at the time of your mortgage renewal.

2. Stability of Relationship

"Happily ever after" sounds wonderful, but isn't always realistic. Be aware that if you pay off your mortgage and your relationship breaks down, your partner/spouse likely has a claim against the value of the matrimonial home.

3. Ability to Save

If paying off your mortgage frees up $1500 a month, will you save that $1500?  If spending, rather than saving, is your forte, then paying off your mortgage now will not benefit you in the long run.

Our structure specialists will discuss all the variables necessary in determining the perfect design for your structured settlement.