Your monthly mortgage payment is likely your biggest expense. Why and how do some people pay it off early? And are there any downsides to paying off your home loan ahead of schedule?
Every homeowner dreams of the day when they pay off their mortgage – and this dream is so strong that many people plan on paying off their home loan early. In this article, we look at the benefits and potential pitfalls of an early mortgage payoff.
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First, let’s talk about the pros of getting that mortgage paid ahead of time:
Sounds great, right? If you can afford to pay more than your monthly loan amount, you’re on the fast track to these perks. But there’s one thing to know: If you choose to pay extra on your monthly mortgage, make sure the additional amount is paying off your loan’s principal (the amount you owe). Some mortgage lenders will simply apply the extra money to the next month’s interest.
As great as all the benefits sound, there are some homeowners who (despite being able to afford the extra payment) choose not to pay off their mortgage early. What are the reasons behind this decision?
Additionally, it’s good to note that paying your home loan off early may lower your credit score, at least temporarily. Also, you’d no longer be eligible for the mortgage interest deduction on your taxes.
Refinancing with a shorter-term mortgage is another option for homeowners who want to pay off their home loan in a hurry. However, refinancing your mortgage also comes with its own costs. Your best bet is to talk with your mortgage lender about your goals and options. Here at Mortgage 1, we want to make sure you get the best advice and the best mortgage for your needs.