Pros and Cons of Paying Off a Mortgage Early

If you are considering paying off a mortgage early, there are a number of things that you will need to think about. Here are some of the pros and cons of paying off a mortgage early.

Pros

One of the biggest advantages of paying off your mortgage early is that you will be able to have greater financial freedom. This is most likely going to be your biggest monthly payment. When you eliminate this payment, you can do so many things with that extra money every month.

When you pay off your mortgage, you are going to be able to take advantage of a much less stressful situation. You should no longer have to worry about whether you can meet the demands of your monthly budget. The psychological advantages alone could make paying off your mortgage early a good decision.

Paying off your mortgage can provide you with some safety as well. When you do not have this large debt, you are not going to have to worry about outside influences as much. For example, you could be laid off from your job at any point. Many people are laid off after more than 20 years of faithful service. If this happens, you are going to be much better off if you do not have a mortgage payment. You may be able to take your time to find another job without stressing about how you are going to pay the bills.

Another big advantage of paying off your mortgage is that you will have extra money to invest. Instead of paying someone else interest every month, you are going to have someone paying you interest. This is one of the quickest ways to financial independence.

Cons

One of the biggest disadvantages of paying off your mortgage early is that you are not going to get the same tax break that you once did. When you are paying a mortgage, you get to deduct the amount of interest that you pay every year from your taxable income. In many cases, this can be a significant tax break. By eliminating your mortgage payment, you are also going to have to pay more income taxes.

Something else that you will want to consider before paying off your mortgage early is that you are potentially getting rid of a loan with very low interest. Many people like to keep a low-interest mortgage on their home and use the money from the mortgage for something else. For example, if you know of an investment on which you can make a higher return than what you are paying in mortgage interest, it may be to your advantage to have a mortgage on your house. If you are planning on taking this approach, you will want to make sure that your investment is very sound. If you put your money into a poor investment, then it would not make much sense to avoid paying off your mortgage for it.