Paying off your mortgage early and being done with those payments seems like a great plan—after all, who wouldn’t want to own their home free and clear? But before you decide to make such a huge decision, consider both the pros and cons of paying off your mortgage early:
Save on interest
One of the main benefits of paying off your home loan early is that you’re saving money on interest that you would have otherwise paid for through your monthly mortgage payments. Depending on your interest rate and how early on you pay off your mortgage, this can be a significant amount of money.
If you have dreams of retiring early, paying off your home can put you one giant step closer to making those dreams a reality. After all, housing payments—whether you’re talking rent or a mortgage—are the highest monthly bills that most people have every month. By completely eliminating one of largest monthly expenses you’ll need to deal with, you’ll free up a lot of your money and you won’t need nearly as much to retire early.
If you own a home that is completely paid off, the risk of losing your home becomes very low. Aside from property taxes, maintenance, and HOA fees (if applicable), there is not much more to worry about when it comes to paying for your home. After all, you’ve just eliminated a huge expense, and this can offer peace of mind.
Because mortgage interest is tax deductible, paying off your mortgage early may affect you negatively when tax season rolls around. However, this may vary from person to person, and there are different factors to take into consideration. To find out if there are any tax liabilities for paying off your home loan early, be sure to consult with an accountant.
Depending on the terms of your specific mortgage, you could be facing pre-payment penalties. Depending on what your interest rate is and what the pre-payment penalties are, it can still help you to save money by just paying off the mortgage. However, you’ll want to carefully look through the terms of your loan and contact your lender before paying off your mortgage entirely.
This is another big disadvantage to consider. It is much more convenient to withdraw money that you have in a bank account or investment account, rather than access the equity in your home. If you do decide to pay off your mortgage early, you may want to think about establishing a home equity line of credit so you have extra liquidity, or access to your money if necessary.
There isn’t a single, correct answer as to whether paying off a mortgage early is a good plan. This will vary by individual circumstances, and will depend on the terms of your own mortgage, personal goals, current lifestyle, future plans, and so on. Before paying off your mortgage, be sure to speak with your accountant and check the terms of your mortgage, or consult with a financial professional who can help evaluate your specific situation.
Do you have large amounts of debt to pay off, but could use some extra cash to make it happen? Peachtree Financial Solutions may be able to help if you’re receiving long-term payments from an annuity or structured settlement. We can buy some or all of your future payments and offer you your money sooner in one lump sum payment. The money you receive from Peachtree can be used to tackle debt, or you may even be able to eliminate your debt completely. To learn more about selling future payments and to receive your free quote, contact Peachtree Financial Solutions today.
Nothing above is meant to provide financial, legal, or tax advice. You should meet with appropriate professionals for such services.