Everyone who buys a home will usually have a home loan mortgage. Now some of these mortgages extend up to thirty years of monthly amortizations. The type of loan will depend on the borrower and the lending facility. However, it is also a well known fact that a lot of families are able to pay off their home loan mortgages at an earlier period, sometimes on the 10th year. However, those who have been paying for more than 20 years usually decide to go on with the amortization.
Well, paying off of a mortgage would mean that anyone who does this will have to pay an early payment penalty. This is not unreasonable. This is the lending company’s security on the earnings they get out of the interest rates. This is the only way they can make money. If their clients pay off all of the loans early, they lose that profit made from interests.
Now, the length of time of the paid loan is a very important factor. The first few years would mean that there is little movement on the payoff of the principal, or the original loanable amount. The payments will place a dent on that after about 10 years. This time period is very important.
You will benefit paying off early if you have only been paying for a short time before you decide to pay the total balance. This is because the principal amount is still as big as it originally was. Paying off with penalties will actually be beneficial for you if you can secure another loan to pay off the total.
You will lose if only five years are left on the mortgage. This means that whatever is left of the principal is very low, but the penalty amount may sometimes be higher than the balance. So if you pay off early, you end up paying more. It is more logical to let the mortgage finish its course and secure another loan for another project than use it to pay for the penalties.
If things are not clear enough, talk to a financial consultant. In the end, you will have to decide on what options is more beneficial for you.