Whether you experience a sudden financial windfall or just find yourself with leftover cash in your budget each month, you might be wondering what to do with those extra funds. One option is to contribute more money toward the loan on your home, but should you pay off a mortgage early, or are there better places to focus your efforts? Here are some key factors to keep in mind. Consider working with a financial advisor as you weigh your options.
Benefits to Paying Off a Mortgage Early
There are some very good reasons to consider paying off a mortgage early, whether that means adding a little extra onto the monthly payment or contributing a lump sum to the balance owed. Here are three benefits to closing out your mortgage loan ahead of schedule.
You’ll Save on Interest
By paying off your home loan early, you will save yourself more in interest charges than if you paid off the loan according to schedule. How much you’ll save depends on the total of the principal-only payments you make, as well as where in the amortization schedule you make those payments (how early into the loan they are applied).
You’ll Reduce Your Living Expenses
Without a monthly mortgage payment, your monthly living expenses will be drastically decreased. The lower your living expenses, the less emergency savings you and your family need in order to feel financially secure. You’re also able to retire sooner or with less in savings if you don’t need to spend as much each month.
You’ll Free Up Cash for...
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