Should You Pay Off Your Mortgage Early? Pros and Cons to Consider
You’ve signed on the dotted line and purchased your first home. For the most part, you’ve always been financially responsible—that’s how you were able to move into your new residence in the first place. Now that you’ve gotten a couple of mortgage payments under your belt, you wonder if you should consider making extra payments to pay off your mortgage early. Here, we’ve summarized a few pros and cons to consider, according to an article shared this month by Investopedia.
An obvious benefit of paying off your mortgage ahead of schedule is the guaranteed savings on mortgage interest, which compounded for 30 years, can save you tens—and in some cases hundreds—of thousands of dollars in interest payments. Otherwise, the amortization schedule in your mortgage documents disclose that you’ll pay over two times the purchase price of your home before you own it outright.
Without the expense of a monthly mortgage payment you may feel that the possibility of unemployment or underemployment is not as intimidating, which can bring you peace of mind. Or, you may feel financially secure enough to take a job or pursue a career that pays less money than your previous occupation without worrying that you might lose your home.
A reliable return on investment
Paying off your mortgage early can provide a return on your investment that is very often much more reliable than investments in the stock market.
Mortgage interest savings can be outpaced by other investment options
Some people say paying off your mortgage early isn’t a wise move, claiming that if you put the extra payments in other investments your rate of return could outperform mortgage interest savings.
A loss of tax deductions
Mortgage interest payments provide tax breaks for homeowners, which will end with the early pay off of your mortgage.