Mortgage Payoff or Saving That Money

Mortgage Payoff Or Saving Money

We read a lot these days about how to pay off your monthly mortgage early. However, is it a good idea? Yes, if you want to be void of a mortgage payment, and have the full equity in your home, and can afford to. Here is some information to help weigh the pros and cons and decide which is best for you.

Here are some reasons why you would want to pay down or off your monthly mortgage early:

  • You want to eliminate debt, and save interest
  • You are close to retirement
  • You are worried about what you owe versus what your home is worth
  • You are considering downsizing
  • You are considering relocating
  • You plan to live in the home for the rest of your life
  • You have a variable income and/or you are worried about job security – your plan is to use the money you have now while you have it.
  • Interest rates may go higher
  • Rates are adjustable and you think yours are about to go up
  • You want to be secure, stable and debt-free

However, there are also reasons why you may want to save money:

  • You need the cash for day-to-day living
  • You do not have a nest egg or cash reserve
  • You do not have much other debt (Having just a mortgage with no car payment or credit card bills is a financially sound way to pay off debt)
  • You are young and have years to pay it off
  • Interest rates on your home are low
  • You need to save for college
  • You need to pay off student loans
  • You need to pay off credit card loans

Weighing the Pros and Cons

Paying off your mortgage early…sometimes called pre-paying…

How important is the security of knowing you have a stash of cash ready in case of emergency, and cash on hand to use, as you need it? Paying off your mortgage with all your extra cash could mean you are “house-rich and cash- poor.”

However, you do not have to pay all of your cash available. You can pay an additional $50 a month. Any amount of money paid on your mortgage decreases the interest you are paying and therefore puts you ahead of the game.

Whatever your situation, from a mortgage underwriter’s point of view, here are the facts:

  • If you pay extra principal on your mortgage loan you are saving interest over the term of your mortgage, the more principal you pay, the less interest you pay.
  • You will get that money back if you decide to sell your home before paying it off as it will be your equity.
  • Should you need cash for something that is important and you do not have it readily available; you can refinance your home loan to get cash out if needed.
  • If you are middle-aged or older, normally retirement income decreases from what you made during your work life. Retirement is when you do not want to worry about having a mortgage loan payment. Most responsible men and women realize that having your home paid for, is one key to living without worry when you become older or retired.


As mentioned above, you do not have to pay all of your extra cash to pay down the principal on your mortgage loan. Most mortgage lenders will allow you to pay amounts as low as you can afford. You are saving for your future when you are paying off that debt because you are decreasing the interest you will be paying over the life of the loan.

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