Are you thinking of paying off your mortgage early?

Question

Are you thinking of paying off your mortgage early? It's a great feeling to own a home without any mortgage payments. However, it's important to consider the costs and sacrifices that come with it. Before making any decisions, here are some questions you should ask yourself:

- Can you allocate a portion of your current income to make regular early payments?

- What if you use a chunk of your savings or inheritance to pay off the mortgage?

- Will you still have money left for emergencies?

Remember, the answers to these questions depend on your individual circumstances and mindset.

Account Closed · Answer

I think this topic should have vastly different answers if you are an investor or an occupant... Even for occupants, that money could go to so many things- tuition ain't cheap. Another big factor is your retirement plans. Beyond just the finances, is this a home that will stay in the family? Or are you going to retire and hit the road?

Randy Rodenhouse · Answer

If you have a good loan with low interest rate and good terms I would continue to make payments and not try to pay down the loan. When you're paying down that loan then you return is essentially the interest rate on that note.  So if you are paying down a 4% loan then making only roughly a 4% return.  When you pay on the loan your money is now locked into the property and unless you have a job with income you will not be able to "unlock" that equity by getting a HELOC or some kinda loan later on if needed.  This could put you in a bad position if you don't have a lot of savings.

Nathaniel Fulford · Answer

On the topic of allocating part of your current income for early mortgage payments, it's a matter of juggling your financial obligations and goals. If directing a portion of your income towards paying off your mortgage early compromises other aspects like investments, retirement savings or even routine expenses, then it may not be the best course of action for you at the moment. I think it's about finding a balance between reducing debt and maintaining a good standard of living.

Using a hefty chunk of your savings or inheritance to clear off the mortgage sounds appealing, but we should tread carefully here. It's a relief to be free of mortgage payments, but emptying your savings for that can put you in a tight spot. You should ideally have 3-6 months' worth of living expenses in your emergency fund. There is also the opportunity cost to consider, that lump sum might earn you a better return if invested wisely elsewhere.