For many homeowners, paying off their mortgage early would seem like a dream. The dream of ridding oneself of all of the stress that exists with debt from their own home. A mortgage can last decades, and such a debt is daunting to first time homebuyers.
With this in mind, paying off your mortgage early would seem like a great idea. After all, with only a little extra money, such as an extra payment per year, you can shorten your mortgage term by several years.
Making extra payments might not always be the wise choice, however. When in possession of credit card or other kinds of high rate debts, such as student loans or fines, those should take priority over your lower interest rate mortgage. It is smart to discuss your options with a mortgage professional as to tap into the equity of your home paying off the high interest rate debts.
One way to save is by taking a little money off your paycheck and depositing it every month, and using it all at the end of the year to make an extra mortgage payment.
By making extra payments, you may have less cash to cover emergency expenses and the like that may show up, such as fines and illnesses that you can’t predict. Therefore, ensure that you have enough money in your emergency savings before you attempt to pay extra.
Finally it is very important to fully understand the terms and conditions of your loan, as to not miss any fees that may show up after paying the mortgage off early, such as prepayment penalties.