Should You Pay Your Mortgage Off Early?
One of the debates that often surfaces surrounding the home mortgage loan is whether or not it is worth it to pay your mortgage off early. Since I am of the school that it is better to get out of debt as soon as possible, I tend to be on the side of doing what you can to pay off the mortgage early. Others are not so sure. The Greenest Dollar has a great article examining the debate over whether or not to pay your mortgage off early:
Don’t pay your mortgage off early
There are some compelling arguments for keeping your mortgage:
- You get a tax deduction for your mortgage interest.
- You can make your mortgage payments, and then invest the extra in the stock market. (Although for those looking to make immediate returns, this may not be the best move right now.)
- You have more liquidity when your assets aren’t all tied up in your house.
Pay your mortgage off early
Of course, the flipside is that there are definite advantages to paying your mortgage off as soon as possible. (The Greenest Dollar points out that “mortgage” is French for “death contract.”)
- The feeling of freedom you have when you get rid of a rather large obligation. (Stress is reduced as well.)
- Once you pay off the mortgage, your monthly liquidity returns, since you have that cash that would have gone to the mortgage payment.
- You actually own your home. Remember: As long as you have a mortgage, you do not actually own your home. The mortgage lender does.
- You save a great deal of money in interest payments — more than you can save in tax deductions.
One way you can pay off your mortgage early is to set up payments on a biweekly schedule, rather than a monthly schedule. This way you get one extra payment a year. Another thing you can do is send an extra payment when you have the money, designated as “for principal only”, to reduce the amount you owe. Just make sure that your mortgage doesn’t come with a prepayment penalty.
December 20th, 2008 at 7:10 pm
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