Pay Off Your Mortgage Early-Should You?

Having been a mortgage underwriter and SVP of Operations for many years-my answer is probably going to be…yes! However, here are some things to consider below.

We know that any time we are paying down a loan, we are in all accounts saving our money and gaining equity. When you pay down the principal, you are paying the amount of interest you would be paying over the life of the loan. The question often exists, should I pay off my monthly mortgage early?

As a mortgage underwriter, I am always advising anyone who asks, yes you do need to if possible. You will limit the interest by paying off as much principal on your mortgage, one extra dollar at a time. Here is some information to help weigh the pros and cons and decide for yourself what will save you the most in the long run.

Here are some reasons why you would want to pay down your monthly mortgage early:

· You want to eliminate debt, and save interest

· You are close to retirement

· You are worried about what you owe versus what your home is worth

· You are considering downsizing

· You are considering relocating

· You plan to live in the home for the rest of your life

· You have a variable income and/or you are worried about job security – your plan is to use the money you

have now while you have got it

· Interest rates may go higher

· Rates are adjustable and you think yours are about to go up

· You really want to be secure, stable, and debt-free

However, there are also reasons why you may want to save money:

· You need the cash for day-to-day living

· You do not have a nest age or cash reserve

· You do not have a lot of other debt (Having just a mortgage with no car payment or credit card is a way to save money also).

· You need to save for college

· You need to pay off student loans

· You need to pay off credit card loans

There are many things to consider which is the better reasons for you.

Weighing Your Options

How important is the security of knowing you have a stash of cash ready in case of emergency, and cash on hand to use, as you need it? Paying off your mortgage with all your extra cash could mean you are “house-rich and cash poor.”

However, you do not have to pay all of your cash available. You can pay an additional $50 a month. Any amount of money paid on your mortgage decreases the interest you are paying and therefore puts you ahead of
the game.

Whatever your situation, from a mortgage underwriter’s point of view, here are the facts:

If you pay extra principal on your mortgage loan you are saving interest over the term of your
mortgage, the more principal you pay, the less interest you pay
You will get that money back if you decide to sell your home prior to paying it off as it will be
your equity
Should you need cash for something that is important and you do not have it readily available; you
can refinance your home loan to get cash out if needed
If you are middle-aged or older, normally retirement income decreases from what you made during your
work life. Retirement is when you do not want to worry about having a mortgage loan payment. Most responsible men and women realize that having your home paid for, it one key to free living when you become older or retired.

As mentioned above, you do not have to pay all of your extra cash to pay down the principal on your mortgage loan. Most mortgage lenders will allow you to pay amounts as low as you can afford. You are actually saving
for your future when you are paying off that debt because you are decreasing the interest you will be paying over the life of the loan.