THE HONEST BROKER: IS EARLY PREPAYMENT OF YOUR MORTGAGE THE RIGHT CHOICE?
BY: DIANE LOTT, BROKER PARADISE FOUND REALTY, INC.
Every homeowner dreams of the day when they no longer have to make any more mortgage payments. The best reason to pay off debt early is to save money and stop paying interest. Interest charges don’t buy you anything except the ability to pay slowly. In fact, if you reduce your loan by even one or two years, you could potentially save hundreds or thousands of dollars. However, paying off mortgage loans fast is not always a good idea for everyone. Sometimes, paying off your mortgage early comes with its disadvantages.
Cons Of Paying Off Your Mortgage Early
YOU WON’T BE PAYING OFF MORE EXPENSIVE DEBTS FIRST
Although your home mortgage is probably your most considerable debt, you may benefit more from paying off credit card or vehicle loans first. This is because these loans have much higher interest rates than mortgages. So, while your mortgage may appear to be enormous, the interest on your smaller loans and credit agreements may be far higher.
EARLY PREPAYMENT PENALTIES
An early repayment charge is a fee charged by your lender if you pay off your mortgage early or pay it off more than the lender allows. This cost isn’t charged by all lenders, and if you’re paying off your mortgage in more than five years, you generally won’t have to worry about it. However, you should always check with your lender first. These repayment fees can sometimes reach thousands.
Pros Of Paying Off Your Mortgage Early
NO MORE MONTHLY PAYMENTS MEANS YOUR MONEY CAN GO TOWARDS OTHER INVESTMENTS
Paying off your mortgage early gives you financial freedom. You’ll have the extra money in your bank account each month to spend on whatever you want. Alternatively, you can put that money toward paying off other debts you might have acquired over the years.
Another thing you can do with those funds is use them to buy a second house for vacations or as a source of profit. Buying a house can be an excellent investment if you plan on renting out.
BECOME DEBT FREE SOONER
If your mortgage is your sole loan, paying it off is the most effective strategy to achieve debt-free status for the rest of your life. There might be fees associated with paying off your mortgage early it would be important to talk to a mortgage expert to be sure you can afford it.
SAVE MONEY ON INTEREST
A portion of your mortgage payment goes toward interest each month, so the fewer payments you make, the less interest you’ll pay. You may save tens of thousands of dollars by paying off your mortgage early. Just make sure that any additional payments would only be applied to the principle, not interest.
YOU OWN YOUR HOME
When you buy a house with a mortgage, you don’t technically own the house until you pay off your loans. Not having a loan means that there is no risk of losing your home when you own it outright.
Peace Of Mind
Lastly, the concept of not having a mortgage to worry about can do wonders for your psychological well-being. The independence that comes with not having to pay a mortgage is an excellent motivator for many.
Be Well!
Diane
Diane Lott, Broker
Owner: Paradise Found Realty
Paradise Found Realty, Inc. of Palm City
website: www.ParadiseFoundRealtyFl.com
Email: diane@paradisefoundrealtyfl.com
Phone: 954-294-5060
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