The dream of many homeowners is to let out an exhalation of breath and cheer at the same time they send the last check into the mortgage company well before their 15 or 30 year loan ends. For these folks, the end to monthly payments is the beginning of a period of financial freedom, whether it be extra money gained or the ability to sell the house and reap the rewards of its full value. However, are there any consequences to this action? Let’s examine the pros and cons and answer this question – should you pay off your mortgage early?
Another item to consider should you want to pay off your mortgage early are any fees attached to the loan. In some instances, lenders will charge a prepayment penalty if the mortgage was refinanced. While many homeowners negotiate to waive this fee, it can sneak up on those who agreed to it during the initial signing. For owners attempting to pay off their mortgage three to five years after the refinance, the prepayment penalty can cut into their profits. Best to consult with your mortgage lender prior to paying off the loan to determine what fees will apply should you pay off early.
There are other factors to consider should you pay off your mortgage early. Many homeowners rely on the interest paid on their mortgage to help reduce their annual federal taxes. Though this may be a large amount when your mortgage is six figures or more, the interest paid will continue to drop as the amount left to be paid is reduce, making it negligible for federal taxes. Two other items to consider are property taxes and home insurance. Normally, these costs are part of the mortgage payment, escrowed for future retrieval. If you consider paying off your mortgage early, make sure you will be able to pay these fees through the normal household budget.
If you don’t see any problems with any of the above issues, go right ahead and pay off your mortgage early. Not only will it provide you financial security, but it will give you a peace of mind you never had before.