Discover the benefits and drawbacks of paying off a home loan early.
If you’re in the enviable position of being able to pay off your mortgage early, should you? The answer depends on your situation and goals. Here’s a look at the benefits and drawbacks to help you decide.
Benefits of paying a mortgage early
There are clear benefits of paying off your mortgage early. There’s a feeling of security and peace that comes with having your home fully paid off. There’s also the satisfaction of knowing you cut your interest costs.
Plus, with no monthly mortgage payment, you can spend your money in other ways. Things like starting a business or retiring are easier when your debt load is lightened.
Why you might not want to pay off a home loan early
Folks with a low-interest home loan may find it more beneficial to keep their low-cost loan. They may find it to their advantage to keep funds liquid or invest them in assets like stocks that offer higher potential returns.
Another reason people choose to keep a home loan over paying it off early is because they want to take the home mortgage interest deduction when doing their taxes.
Check your loan details for prepayment terms
Some mortgages include a penalty for paying off a loan early. Typically, the penalty is figured as a percentage of the remaining loan balance and could be 1%-3%. Check your loan documents to see if prepayment penalty applies in your case.
By the way, at Consumers, we never charge members a penalty for prepaying a consumer purpose closed end mortgage loan. Check out our mortgages designed for everyone from first-time buyers to those who want to refinance.
All loans subject to approval. Rates, terms, and conditions are subject to change may vary based on credit worthiness, qualifications, and collateral conditions.