Are you thinking about paying off your mortgage early??
One additional payment per year can save you thousands of dollars in interest!
There are two good ways to pay off your mortgage sooner:
1. Make an additional payment by writing one additional check a year to be applied directly to principal.
2. Split each of your normal monthly payments in half and pay every two weeks. (26 half payments equals 13 whole payments)
By making one extra payment per year you will pay less interest and your payments are applied to your principal balance more frequently!
To Pay or Not to Pay off early
To pay your mortgage off early is a secure investment. Many debate whether or not to put extra money towards paying off their mortgage or invest in bonds or stock market. Consider prepaying your mortgage because it reduces total interest expense. You will earn a 'guaranteed return' on your home mortgage.
To not pay your mortgage you will generally get a better market return. If you have a 30 year mortgage at 7% and take advantage of the tax deduction, you will get a better return on any market investment that earns more than 5.1%.
To pay your mortgage early you can cancel your Private Mortgage Insurance (PMI). You probably have PMI if you borrowed more than 80% of your home's appraised value. Making extra payments on your mortgage will help you reach the 20% equity you need to drop the PMI and stop paying those premiums.
To not pay off your mortgage early or you will lose the tax deduction. You will not be able to deduct the interest you would have been paying. If you are in a high tax bracket you should weigh the consequences before paying down the mortgage.
To pay your mortgage early will give you peace of mind. Owning a home and being debt free can be psychologically rewarding. Just be careful that paying your mortgage early doesn't come at the expense of using your retirement savings or lead to high interest credit cards debt.
To not pay your mortgage early because of a possible prepayment penalty. Most fixed mortgages don't carry prepayment penalties, some adjustable rate mortgages do. Discuss the terms of your loan with your lender before you prepay to make sure you won't be penalized.
To pay your mortgage early to have more at retirement. Pay more now to have more later! If you would prefer to not have to use your retirement savings to finish paying your mortgage then consider prepaying now while you are in the workforce.
Planning for tomorrow is important. The more you educate yourself on your financial options, the more confident you will feel with your decisions.
About Heidi
- Heidi
- Utah County, Utah, United States
- Heidi currently works as a realtor in Utah! Heidi has had several careers that range from business owner to radio talk show host. But her first love and interest is homes. Now she is fulfilling a life long dream of being a realtor. She is friendly, honest, helpful and reliable. You can count on her to do what she says she will do! Heidi's area of expertise is primarily in the Utah County area where she has lived and raised her family for 15 years: Alpine, Highland, Cedar Hills, American Fork, Pleasant Grove, Lindon, Orem, Provo, Spanish Fork, and Payson. Heidi takes home ownership seriously and she won't pressure you to buy a home so that she can 'make a sale'! Heidi believes that a home isn't just four walls... it is where you live, learn, love, laugh and grow. It is a place for traditions and family gatherings. She will take time to get to know you and find a home to fill your wants and needs!