Pros and Cons of Paying Off Your Mortgage Early

architecture, building, buyThinking of paying back your mortgage early? Assess the pros and cons before doing it!

Pros of Paying Off Early

If you think you can pay off your mortgage early, there is a lot of savings that comes with it. You could actually save thousands of dollars if you pay it off right. Paying off your mortgage early can save you in long-term interest costs.

It can also be great for your overall credit. It decreases your debt, reflecting that you can manage it responsibly by paying it off before it’s due. You have a better debt to income ratio.

Cons of Paying off Early

Unfortunately, paying off your mortgage early can have its negatives.

If you ask a financial advisor about paying off your mortgage early, they will probably advise against it. You may be wondering why, and it comes down to the tax write-offs. You won’t be able to take advantage of the mortgage interest deductions or tax write-offs you can get from paying interest on your mortgage.

By paying a mortgage early, you’re cutting your acquired interest, so you’re losing some that benefit. You won’t be able to take the full extent of mortgage write-offs.

Another disadvantage is, when you put more money into your mortgage, that money is “illiquid”, which means the cash you put toward your home can’t be reaccessed in case of an emergency. That means, if you don’t have enough money to pad your saving while paying off your mortgage early, you can dig yourself into a financial hole if an emergency pops up.

How to Pay Off Your Mortgage Early

Ultimately, it’s up to you and your lifestyle whether or not the pros outweigh the cons of paying off your mortgage early. offers tips to make it happen:

  • Make a payment at the end of the year after you’ve assessed how much extra cash you have. Make the payment to the principal so it reduces the amount of interest you pay in the future.
  • Make an extra payment monthly into a separate check citing “principle” in the memo.
  • Make one-thirtieth of the payment every day to make certain you don’t acquire any interest.
  • If you have mortgage insurance, track the loan-to-value ration on the house and refinance it when you hit 85% LTV. This could lead to hundreds in savings each month which can be applied to the principle balance and not the bank’s insurance.

Other ways you can pay off little-by-little is to plan to increase the amount of money you put toward your loan each month. You can also vow to put any extra money you find like tax return or birthday money toward your mortgage.

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