When To Consider Early Mortgage Payoff

2007-05-02 10:04:19

( Financial )



An early mortgage payoff may not come to mind if you have a high monthly income. You would rather invest your money in other liquid investments that offer higher yields while taking advantage of the mortgage interest deduction on your tax return at the same time. But if you earn a meager income with little savings in the bank or you are already retired but still paying a home mortgage each month, then an early mortgage payoff may make sense.

Early mortgage payoff helps to save thousands of dollars on your existing mortgage. If you calculate payoff using a debt payoff calculator, you will end up paying less on interest as you reduce the amount of principal. You can do this by writing an extra check and instructing your lender to apply the amount to the principal. This may result to higher monthly payments on your mortgage, but it significantly shortens the life of your loan.

If possible, monitor closely all the payments you have paid. Although lenders do not have the intention of misappropriating payments, errors can sometimes happen. It will be easy to reconcile your mortgage payoff with the lender if you have a personal monitoring practice. You may want to know if your lender provides online access to payment history of their customers. Else, you can make your own spreadsheet to record payment transactions of your mortgage.

Your decision for an early mortgage payoff should not be taken lightly. You would not want to commit costly financial mistakes. If you still have substantial debts on car loans, credit cards, and other unsecured loans that have higher interest rates, you have to pay these loans first before you even think about early mortgage payoff. You should consult your trusted financial advisor to help you analyze your financial circumstances.


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