Paying off your mortgage might seem like a dream come true: no more payments, no more interest and owning your house in full. Who wouldn’t want all of that?
While those are undoubtedly big perks, paying off your loan can also have drawbacks, especially if you do it ahead of schedule.
Are you considering paying off your home loan early? Think about these pros and cons before you make up your mind:
Pros:
- You’ll save on interest payments. You could save thousands in interest by paying your loan off early.
- You’ll have an easier retirement. A limited income may make a monthly mortgage payment difficult, so paying it off ahead of retiring could be a good plan.
- You’ll free up cash flow. Not having a monthly loan payment may mean more money for other things.
- It could improve your credit score. It’s possible that paying off your mortgage could help your score.
Cons:
- There might be a prepayment penalty. Some loans have terms that could end up costing you if you pay them off ahead of schedule. Check in to go over the specifics of your mortgage.
- It’ll take funds away from other investments. By investing in the stock market, real estate and other options instead, you could accrue more money in the long run.
- You’ll miss out on mortgage tax deductions. You get valuable tax benefits as a homeowner, but some are no longer available once you pay off your loan.
- You’ll likely lose money if you suddenly need to sell. If you don’t keep the house for the long haul, you may end up losing money by paying the loan off early.
There’s a lot to think about when deciding whether to prepay your mortgage, as you can see. Reach out today if you have any questions about your home loan.
