As you embark on your journey to achieve financial stability and take control of your debt, your home presents an exciting opportunity to make significant progress. The idea of completely owning your home is certainly tempting. However, is it the right move to make at this stage of the game? The answer is not a simple “yes” or “no” for everyone. You must consider a variety of factors to make an informed decision.
Pros and Cons
Paying off your mortgage early can have a significant impact on your financial future, so it is important to put careful thought into the best course of action. Some of the pros include:
- Peace of Mind: There’s no denying the relief you will feel knowing that your home is secure for the future.
- Interest Savings: Depending on the price of your home and your loan’s interest rate, you can save a substantial amount by paying off your mortgage five or ten years early.
- Invest in Retirement: If saving for the future is your goal, an early payoff allows you to free up funds to put toward your retirement.
- Extra Money: Your mortgage payment likely accounts for a large portion of your monthly expenses. Eliminate that payment, and you will have extra money to enjoy life’s other pleasures.
These are great reasons to consider paying off your mortgage early, but there are a few other considerations to keep in mind before you go all-in on early payments. Some of the cons include:
- Potential Penalties: Some mortgages have penalties for early repayment. Read the fine print before you decide to pay off yours.
- Better Uses of Your Money: While your mortgage may be the biggest loan on your books, it may not be the most significant financial liability you owe. If you have credit cards, car loans or similar unsecured debt, it may be a better use of your resources to repay those debts first.
- Tax Benefits: When you pay off your mortgage, you eliminate a rather substantial tax benefit in the mortgage interest deduction.
As you can see, there are compelling pros and cons to consider when deciding whether to pay off your mortgage early. To eliminate any confusion, you might want to work with a financial advisor. Your advisor can help you determine the most judicious use of your resources for a better financial future.