Credit Card Debt Champions Asks - Do You Want to Pay off Mortgage Early

Paying off your mortgage early sounds like a good idea if taken at face value

Chicago, IL (prHWY.com) March 2, 2012 - Paying off your mortgage early sounds like a good idea if taken at face value. However, in the rapidly changing environment of home values, mortgage issues and credit problems related to unemployment and under-employment, consider a few questions to decide if paying off your mortgage early is something you want to do.

If you intend to stay in your home over the long term, paying off your mortgage early dramatically decreases the amount of interest you will pay over the life of the loan. However, not all people will benefit equally from an early payoff.

1.) Are Your Revolving Debt Accounts Current?

If your revolving credit card debts are current, then paying extra on the mortgage may be a good idea. However, revolving debt usually carriers higher interest rates than a mortgage loan, so paying off those credit cards is more important in the short term than paying extra on the mortgage loan. Consider consolidating your revolving debt with a non profit debt consolidation company. This is one way to reduce the interest paid over time for revolving accounts.

2.) Are You Contributing the Maximum Amount to Your Retirement Plan?

If you are already contributing the maximum amount your company allows to your retirement plan, then paying extra on the mortgage may make sense if your budget allows. Contributing to your retirement plan, especially if your company matches a portion of your contribution, is a much more important investment than paying extra on your mortgage loan.

3.) Have You Put Aside an Emergency Fund?

If you do not have several months' income in savings for emergencies, such as sudden job loss, then start saving now and put off paying extra on your mortgage loan until at least three months income or more are in savings just in case the unforeseen happens.

4.) Does Your Mortgage Company Charge a Prepayment Penalty?

Most mortgage companies welcome early payoffs, and most do not charge a prepayment penalty. However, be sure that your mortgage company is not the exception to the rule. It does not make sense to pay off the mortgage early if you will be hit with a hefty prepayment penalty for doing so.

5.) Considering Other Bills and Expenses, Will Paying Off the Mortgage Early Be Worth the Effort?

Keep in mind that, at tax time, those mortgage interest deductions are quite substantial. If you pay off the mortgage early, these deductions are no longer available. Use an online mortgage tax deduction calculator to weigh the benefits of this deduction against the money you will save by paying off the loan early.

Non profit debt consolidation may be more valuable to you than paying off the mortgage early, depending on what types of debt you owe. Research your options and compare the benefits of paying off credit cards, putting money into savings and paying other short-term expenses before paying accelerated payments on your home loan.

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Categories: Finance

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