Paying off a mortgage and ultimately owning the home you purchased is the goal of many homeowners. You do not have to worry about making monthly mortgage payments and can put that extra money into savings.

But should you pay your mortgage off early, before you retire?

prepayment penaltyYou Will Save Money On Interest

One of the main pros of paying off your mortgage early is that you will save money on interest. Depending on the terms and size of the loan, interest will build, causing you to pay more on your home loan over time. This is especially appealing to homeowners whose monthly mortgage payments represent a chunk of their income. Not having those payments brings peace of mind.

Alternatively, you could save on interest by simply chip away at the loan’s principal by making extra payments towards it.

You Can No Longer Write Off Mortgage Payments On Federal Taxes

On the other hand, paying off your mortgage early means you are no longer eligible for mortgage interest tax deductions. Many homeowners look forward to this deduction and prefer to refinance for better terms.

You May Have To Pay Prepayment Penalties

Depending on your lender and contract, you may have to pay fees for paying off your mortgage early. This is called a prepayment penalty, an agreement between you and the lender that dictates how much you, as the borrower, are allowed to pay off and when. If you pay your mortgage early, you will have to pay a fee. This penalty is used as protection for lenders against losing interest income.

Less Liquidity Available To You

While owning a home is a significant investment that comes with risk, keeping your mortgage means that you will have more in the way of assets. If you pay off your mortgage early, you will not have the liquidity available to address emergencies like an unexpected hospital stay. Besides, paying your mortgage off early means that it may be more challenging to build your home’s equity due to not paying on the house each month.

Consider Refinancing Your Home & Paying Off Other Debts Instead

If you are thinking of paying off your mortgage early, consider refinancing instead for better terms and rates. Just remember to refinance when it makes the most financial sense for you and make sure that you are up to date on your monthly payments and not too close to paying off the mortgage.

In addition, you should also focus on paying off other debts instead, like student loans and credit cards. In the end, whether or not to pay off your mortgage early is up to you.

Start Your Search For The Perfect Home Today

Contact Eric Merchant At 314.541.1218