There are studies indicating that 40% of households pay their mortgage way ahead of time. This is actually not one of the best solutions plus there are different options to consider. Let us see why this isn't the right move.
If you pay your mortgage earlier you can be penalized for an early mortgage prepayment. Other kinds of loans have this penalty and this can be assessed when you pay more than the price of your mortgage within one year. There are also some who sanction who if you make a payment that is over a certain percentage. Paying a dollar more than your monthly payments, results to a penalty. Make sure that you go over your mortgage loan documents and see to it that there aren't any other penalties if you make a payment that is more than the expected payment.
One thing to remember if you plan to pay your mortgages ahead of time is to settle credit card debts first. Having financial obligations when it comes to your credit card can be more expensive due to the high interest rate. Moreover, when you pay your credit cards ahead of time this will improve your credit score. Having a high score may increase your chances in getting a loan application approved.
Talk to a tax professional on tax deductions and benefits if you plan to pay back your mortgage at an earlier time. Being on a high tax bracket or owing 15 years on your mortgage may not entitle you for a tax benefit.
Whenever you are offered good financial decisions, do not pass off that offer just so you can pay your mortgage. If for example, your boss will offer to match your 401k, grab that opportunity. Holding off important insurance for the reason to pay off your mortgage is a wrong choice. Auto, home and health insurance are considered as security and these are needed when unforeseen events happen. Look at your other choices. Invest the extra money in something worthwhile than giving it to your lender. This way, you can earn extra by the interest rates that this investment can offer. On the other hand, if your mortgage offers a higher rate compared to what you're investing in it is a wise choice pay the mortgage loan instead.