Paying Off Your Mortgage Early

If you are seriously thinking of putting  a plan in place that is going to help you pay off your mortgage loan early, then make sure that you stay committed to it. Here are some tips to help you pay off your mortgage soon:

• Make Early Repayments: One great way to start paying off your mortgage early is by making payments into your mortgage account before the due date each month. This will help reduce the interest charges on your mortgage account and you will be amazed to see the amount you have saved in interest by just making early repayments into your mortgage.

• Use Your Lump-sum Payments: Each year if you have received a tax refund or a unused leave payment or an employment termination payment, plough these payments back into your mortgage to reduce the balance faster.

• Prepay Into Your Mortgage: By looking at the loan schedule on your mortgage you will be able to ascertain the interest and the principle component.  By doing this you will be able to make out what the principle component for the next month is going to be. Prepay a little in to your mortgage early each month and eventually by the end of the year you would have made an entire extra payment.

• Fortnightly Payments: Remember that if you are paying fortnightly you have 26 payments in a year and not 24. Consumers often make this mistake. The advantage of fortnightly payments is that at the end of the year just as we have stated above, you make an entire extra payment into your mortgage.

• Inform The Banks: If you are making extra contributions into your mortgage loan to pay it off early, make sure that you inform the banks of the same. You also must keep a tab that the payments are being used to reduce your principal component of the loan.

Pros And Cons Of Paying Off Your House Mortgage Early

Here are a few arguments that support the notion of paying off your mortgage early:

1. Once you have paid off your mortgage loan you are truly the outright owner of the property.
2. Paying off your house mortgage sooner also ensures that you are stress free as you have managed to get rid of a major financial liability.
3. Paying off your mortgage sooner also opens up a lot of other investment avenues.

Here are some arguments that do not support the notion of paying off your mortgage soon:

1. Once you have paid off your mortgage, you lose the ability to claim tax deduction on the interest component of your house.
2. Instead of paying off your mortgage early a lot of people are of the opinion that the surplus funds instead of being channelled into your mortgage could be used for investment purposes. This is however is very debateable as real estate investors would argue that after paying off your mortgage, you get another mortgage on the property and used the funds to buy an investment property and gain rental returns from it. This in turn would allow you to use the rental returns for investment purposes.

As we have seen there are arguments to both sides of the coin. However, there is no denying the fact that paying off your mortgage early has a lot more benefits than downsides.

References:

1. Tips on Paying Off A Mortgage Early – Consumer Tips and Reports
2. How to pay off your mortgage early – The Greenest Dollar