With four rate hikes in 2018, mortgage interest might be creeping higher, but nonetheless, CNBC’s “Shark Tank” personality Kevin O’Leary suggests that paying off your mortgage should be the number one priority when it comes to eliminating debt.
“The No. 1 debt you want to get rid of is pay off your mortgage,” O’Leary told CNBC Make It.
Current homeowners are no longer able to reap previous benefits of deducting mortgage interest as a result of the Tax Cuts and Jobs Act, which was made official in 2017. Close to 13.8 million taxpayers will be eligible for the mortgage-interest deduction in 2018, but this is down from the 32.3 million in 2017–a 57 percent decline.
“Particularly if you’re starting out and you’ve just had your first child with your significant other, you want to pay off that mortgage. You want to get rid of that so you can start saving money and investing in your future,” O’Leary said.
In addition, O’Leary suggests that prospective homeowners should never overextend themselves when it comes to taking on a mortgage. The real estate sector, however, is facing its own headwinds.
Just last month, the National Association of Home Builders/Wells Fargo Housing Market Index hit a three-year low. A combination of rising interest rates and low home affordability dented the housing market for much of 2018.
However, builder confidence rebounded as the index went up to 58 in January compared to the 56 reading in December. Furthermore, the central bank has been sounding increasingly dovish as of late, which could mean that less rate hikes than anticipated for 2019–something that could help give the sector a much-needed boost.
New homeowners should also be wary if they also carry student debt. O’Leary says paying off the mortgage and student debt should be both high on the list.
“Those are the two big ones. You want to pay off that student loan, and you don’t want to get stuck in too big of a mortgage because you have to pay that one off too. Pay those off as fast as you can, and your savings will start,” said O’Leary.
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