Joey Regrets Paying Off His House
The year was 2006 and Joey was a few years into his structured settlement. Joey decided that he would feel better if he owned his home free and clear, so he took a structured settlement cash out to pay off his home loan. At the time interest rates were around 5.75%, a bit high by 2013 standards, but pretty good at the time. Of course, selling his payments cost Joey more than that – but he felt it was worth it just to know that his house was paid off and he was prepping for retirement. Unfortunately, just a year or so later the housing market crashed; Joey’s house is now worth a fraction of what he paid for it. On top of that, Joey wants to move – now he can only sell his house for pennies on the dollar and has no financial reserves to call upon.
If you are considering a structured settlement lump sum cash out to pay off your house think about Joey, and what you might learn for your own situation. Interest rates heading into 2014 were extremely low – far less than you would pay to sell your settlement payments. What are they today? Structured settlement annuities rates don’t change as quickly as house value or interest, so that’s something to consider.
Well, you say, paying off my house will provide peace of mind. Fair enough; that’s a valid reason to make any decision. But think about it: What if your life changes, again? If you have a mortgage you always have the option to short sale, or even simply give up your home in a Deed in Lieu of Foreclosure process – this would allow you to get rid of a house that had lost its value while still receiving your settlement payments. These may not sound like great options, but they are things to consider before you decide to pay off your home.