Early Mortgage Payoffs
Studies show that 40% of families pay off their mortgage at an earlier time. This may be not the best solution and there are other financial alternatives that are better. So isnâ€™t this a smart move?
Paying off your mortgage earlier can result to a mortgage prepayment penalty. Some loans have this penalty and this can be evaluated when you pay over a certain amount of money toward your mortgage within a single year. Others penalize you if you pay more than a certain percentage in a year. Even if this is just a dollar over your scheduled payments, they can give a penalty. Read through your loan documents and make sure that there aren’t any penalties if you pay more than your scheduled payments.
Before even considering in paying your mortgage early, it is better to pay credit card debts ahead of time. Credit card debt is more expensive to have because of its high interest rate. Also, paying your credit cards on time will increase your credit score which can help you apply for a loan faster and easier.
If you are in a higher tax bracket or you owe more than 15 years on your mortgage, paying this off might not give you a tax benefit. Discuss with your tax preparer on the tax deductions if you decide to pay your mortgage early.
If ever you are offered financial decisions that are good, do not skip out on it just to pay your mortgage. Like for instance if your employer offers a match on your 401k, max out the investment. Do not give up paying on life insurance just because of your mortgage payments. Insurance like home, auto and health serves as your security in case something unfortunate happens to you.
Always remember to look at your options. Think about investing your extra money instead of sending it to your mortgage lender. If the investment has a high interest rate, then you can definitely earn more money. But if your mortgage has a higher interest rate than what youâ’re investing, it is better to pay your mortgage. Bear in mind to consider other financial alternatives before paying off your mortgage. You can earn more money in the process.