Early Mortgage Payoff – The Top 5 Things You Need to Know

 

Early Mortgage Payoff – The Top 5 Things You Need to Know
By Alan Pavan

Early mortgage pay off may seem like an unreachable dream, but when done properly that dream can be realized. With some discipline and effort you can pay off your mortgage early and save thousands in interest payments over the life of your loan. Here are the top 5 things you need to take into consideration when deciding to undertake paying your mortgage off early.

Just because you can doesn’t mean you should.

Right now, depending on your interest rate, a 30 year fixed rate loan is a great investment. Assuming that your income will increase over the next 30 years and your payments will not, The effective cost of your mortgage will decrease over time. As long as you have a fixed payment, you should consider carefully where you might better invest the money you would be applying to your mortgage.

Invest or Pay Off?

Again, depending on the terms of your mortgage, You might be better served to invest the amount you are thinking of applying to your mortgage. A good rule of thumb is to evaluate the interest rate of your mortgage against the interest rate you can get from investments. If your mortgage has a higher interest rate than investments, it’s better to pay off your mortgage.

When Should You Pay Off?

The decision to pay off your mortgage depends on the priority you place on the satisfaction of having your mortgage paid off. There is a lot to be said for the feeling of peace and comfort knowing that you own your home free and clear. However, there are times that you should postpone your Mortgage Payoff. For example, you should always apply any additional amount to higher interest rate loans such as credit cards to pay them off first. Then apply the amount to the mortgage. This way you will maximize the interest you save over all of your debts.

Late Fees Are Killers.

Remember, even if you are paying an additional amount to your mortgage, if you make a late payment that amount is added to the loan and will be charged interest. That 30-50 dollar late fee could end up costing you many hundreds of dollars over the life of the loan.

It Takes Discipline.

Early mortgage payoff takes discipline. Unfortunately this is what most of us lack that gets us into unsustainable debt problems in the first place. If you decide to apply an additional amount to your mortgage, you must be consistent. Consider putting your mortgage payment on auto-draft at your bank. This way you will take the discipline somewhat out of your hands.

The choice of early mortgage payoff is yours to make. As you carefully consider the options, make sure you apply your disposable income in a way that will fulfill your emotional sense of accomplishment as well as optimize you interest savings.

Alan Pavan invites you to discover the secret to your debt free future at: http://financialins.com

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