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A Paid-off Mortgage Vs an Emergency Fund

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 24th Aug, 2012 08:09pm
Nothing in this world can be achieved free of cost. This holds true in case of mortgages also. If you take out a mortgage loan, then you are responsible to repay that loan and that too with interest. In case you default, you may have to face the serious consequences of foreclosure. As a prudent financial practice, it is advised that you should repay your loan on time and you must put in serious efforts to avoid default. A paid-off mortgage indicates your financial responsibility and it has also positive effects on your credit standing.

On the other hand, keeping an emergency fund in place is a wise financial decision. This is indeed very helpful to tide over the emergency situations. If you have the cushion of an emergency fund, you don't have to use your regular income to cope with that situation. Like a paid-off mortgage, keeping an emergency fund also indicates your financial discretion.
Posted on: 24th Aug, 2012 08:09 pm
Is it worth enough to have an emergency fund for the crisis period or should I concentrate on paying off my home loan?
Hi Salmonella,

I personally feel that an emergency fund is always helpful for any household. We never know when emergency situation or a crisis will strike us. So, it should be better if we could create an emergency fund and at the same time manage the mortgage payments as well.

Posted on: 24th Aug, 2012 09:55 pm
Emergency situations do not come at any specific and pre-determined time. These come out of the blues. If you are financially prudent then you must make provision for an emergency fund so as to tide over unintended contingencies. On the other hand, if you take out a mortgage loan, you must make it a usual practice to repay your loan on a regular basis. If you are into a crisis situation, you should not stop repaying the mortgage loan. Instead, you should use your emergency fund to tackle the crisis.
Posted on: 24th Aug, 2012 10:30 pm
Welcome Salmonella,

I personally feel that both are important. A paid off mortgage is definitely good because it will make your home free and clear and you will be free from mortgage payments and concentrate more on saving money. However, an emergency fund is also equally important because it will help you in managing your emergency crisis situation well.
Posted on: 26th Aug, 2012 09:02 pm
Hi Salmonella!

Welcome to forums!

Emergency fund is a must for anyone. It is irrespective of whether you pay your mortgage or rent a property. With the help of a emergency fund, you will be able to manage any crisis situation with ease and won't face any issues later on. So, you should save money in such a way that you can make payments toward your mortgage and also maintain an emergency fund.

Feel free to ask if you've further queries.

Posted on: 27th Aug, 2012 09:45 pm
Emergency fund is essential for uncertain situations as such phases may or may not occur. You can also adjust with the reduction in payment of home loan on consulting with agency and save a little for emergency simultaneously.
Posted on: 09th Nov, 2012 01:06 am
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