What to Know About Paying Off Your Mortgage Early September 15, 2021 Life at Home
A mortgage is a large, long-term expense and the prospect of taking on that kind of debt for years to come can be daunting. Just because you start out with a set repayment term for your loan doesn’t mean you can’t pay it off ahead of schedule. It is possible to pay off your mortgage early, but whether it’s the right decision for you depends on a variety of factors. Read on to learn more about paying off your mortgage early.
Pros
The obvious pro of paying off your mortgage early is that you will eliminate that outstanding debt. You can say goodbye to monthly payments. Paying off your loan ahead of schedule saves you money on interest as well; the faster you pay it off, the less interest you will have to pay on top of the principal. Once your mortgage is paid off, you own your home outright and do not have to worry about foreclosure. By no longer needing to pay for your home, you can allocate that money elsewhere and do things like saving for retirement, starting or adding to a college fund, bulking up your emergency savings, invest, or simply enjoying the new disposable income you have each month without a mortgage payment.
Cons
There are some potential downsides to paying off your home loan early. Once your mortgage is paid off, you are no longer able to claim the mortgage interest tax deduction which uses the amount you pay in interest to reduce your taxable income. Some lenders charge a prepayment fee if you refinance, sell your home, or pay off your mortgage within a certain period of time following closing. You should check to see if your lender does charge this kind of fee and, if so, determine whether the cost incurred is worth it versus waiting to pay off your loan until the stated time range has passed. Something to bear in mind when paying off any kind of loan is that it can actually hurt your credit score. This is mostly important to think about if you are trying to secure some other kind of loan at the time you are thinking about paying off your mortgage. However, your credit score can always be improved upon, so this should not necessarily deter you from paying off the loan if it is beneficial to you in other ways.
Things to Consider
In some cases, pursuing other investments can bring in more money than paying off your mortgage early. It may be worth looking into alternative investment opportunities that you can put the money towards rather than paying your mortgage off ahead of schedule. This is more likely to be the case when you have a lower interest rate and therefore are not accruing as much interest on top of your principal. This is a nuanced issue, and one worth discussing with a financial professional or your lender. When it comes to debt, you should generally focus on paying off higher-interest debt ahead of lower-interest debt, so if you have loans with an interest rate higher than that of your mortgage, you may want to prioritize that. You also want to make sure that paying your mortgage off early doesn’t deplete your cash reserves or savings. Paying off your loan early may be beneficial in some ways, but if it leaves you without any money for paying bills or emergency expenses that come up, it can cause more problems than it solves.
How to Pay Off Your Mortgage Early
Arguably the most common way to pay off your mortgage early is to make extra payments, usually by going from monthly to biweekly payments or making an extra monthly payment. Biweekly payments break up your monthly mortgage in half and result in you making what equates to 13 months of payments in a given year rather than 12. An extra monthly payment is when you pay more each month. When you do this, it is important that you specify that the payment go towards principal, not interest. Alternatively, you can refinance your mortgage to secure a lower rate which may enable you to make additional payments by spending less on interest. You can also refinance to a shorter term (e.g. from 30-year to 15-year), thereby setting you up to pay off your mortgage earlier. If you find yourself with extra money to spend at once, you could also contribute lump-sum payments outside of your monthly payments in order to chip away at the principal. There are a variety of options for paying off your loan early, and you should consult your lender to determine the best course of action for your unique situation.
Are you thinking about paying off your mortgage or buying a new home? Contact one of our skilled Loan Officers today to learn more about your options!
Related Posts
Preparing For The Holiday Season
With the world slowly getting back to a new normal after Covid-19, this year’s holiday season might reflect the past holiday seasons, which for many is hectic. If you’re hosting dinner at your house this year, your mind is probably going through every detail before guests arrive. Here are a few pointers to help you […]
November 17, 2021 Full Post 
Adding Value to Your Home This Fall
For most homeowners, fall is the season you adorn the house with harvest decorations and take in the colorful foliage. The new season can also be the perfect time to tackle some home improvement projects you have on your to-do list. The cooler weather makes outside DIY tasks more bearable, or if you decide to […]
November 08, 2021 Full Post 
Understanding Property Taxes
When buying a home, most of us know to expect costs associated with homeownership such as closing fees and utility payments, but what about property taxes? Property taxes are an unavoidable aspect of owning a home. Read on to learn more about property taxes and how it’s decided how much you have to pay. What […]
October 06, 2021 Full Post
Connect With Us
Contact Us
For security purposes, please do not disclose any confidential or sensitive information.
To speak with a loan officer, please see
Find a Loan Officer.
For servicing questions, please call
877-220-0999
(877) 933-3100
5355 Nottingham Drive, Suite 130
Baltimore, MD 21236
Welcome to the Borrower Portal! This is your access point to get pre-qualified, send/receive documents, and eSign Disclosures.
Click ‘Access Borrower Portal’ below if you are:
- Logging in to an existing account to continue with your pre-qualification.
- Logging in to an existing account to send/receive documents, or eSign Disclosures.
- Logging in to complete the email verification process.
Click ‘Find a Loan Officer’ below if you are:
- Creating a new account to get pre-qualified
- Signing into an existing account to get pre-qualified
Once on the desired Loan Officer’s page, click ‘Get Pre-Qualified’ to begin.
Access Borrower Portal Find a Loan OfficerOriginal Article