If it’s financially feasible for you to pay off your mortgage early, you might want to consider doing so. However, that’s a major money move – so don’t just jump into the decision. Read on to learn more about why this might be a good route for you to take.
Reasons to Consider Paying Off Your Mortgage Early
Your mortgage is most likely your largest debt and probably your biggest monthly payment. Paying it off early will free up significant money each month that may allow you to:
- save for other things
- invest in exciting projects
- invest in the stock market
- give generously to other people who may be struggling financially
- upgrade your lifestyle
- save more for retirement or kids’ college
Review Your Financial Situation
When you set out to determine whether an early mortgage payoff is right for you, there are a number of factors you must consider. You’ll need to take a hard look at your financial situation.
Consider whether you have other hefty debts looming over you. Often, they have considerably shorter terms and higher interest rates, and paying off those debts should take priority over paying down your mortgage early.
You also need to factor in the state of your savings, and whether you are putting aside enough money for retirement. If you aren’t saving adequately for the future, that should be prioritized over paying extra money on your mortgage.
Strategies for Early Payment
Adding Onto Monthly Payments
One way to pay off your mortgage early is to pay extra money toward your mortgage principal. You can either make this payment in one big lump sum, or over time by adding an extra amount to your payment each month. However, before you do this make sure to specify to your bank that the extra money is to go to the principal, and check to make sure that your mortgage terms do not include any penalties for pre-payment.
More Frequent Payments
Another way to speed up your mortgage payoff is to switch the payment schedule to make your payments more frequent. Changing to a bi-weekly payoff plan would split your mortgage payment in half, and you would pay that amount every two weeks. Because there are 26 weeks in a year, you would be paying the equivalent of 13 months’ payments every year, instead of the traditional 12.
A mortgage refinance may benefit you in a couple of different ways. First, if you end up getting a lower interest rate and lowering your monthly payment, you will free up more money that you can then apply to your mortgage if you wish.
Second, if you refinance to a mortgage with a shorter term, you will likely get a lower interest rate and you will pay off your mortgage more quickly because the new payment amount would be calculated based on an earlier payoff date.
These are just a few ways to achieve your goal of paying off your mortgage loan early. If you’re looking for a refinance to try and reduce your payments or speed up your mortgage payoff, contact TILA Mortgage.
We are the experts in home loan financing in Seattle and throughout Washington State. See how we can help you meet your financial goals more quickly!