Want to Pay Off Your Mortgage Early? Pros, Cons and Smart Strategies

Deciding what to do with extra cash can be tricky, especially when it comes to your mortgage. While owning your home outright is a dream for many, it’s not always the best financial move. Depending on your goals, investing that money elsewhere might offer greater returns.

There are several factors to consider when deciding whether to pay off your mortgage or invest the funds elsewhere, including your personal financial plan, time horizon, taxes, risk tolerance, and the potential impact on savings. Let's explore options to c

When is it Better to Pay Off Your Mortgage Early?

• Saving on Interest
  By paying off your mortgage in advance, you can save thousands of dollars in interest. This can be especially impactful if you are in the early years of your loan, when most of your monthly payment goes towards interest rather than principal.
• Increased Financial Security
  Once you’ve paid off your mortgage, you will own the home outright, so if your finances take a dip (due to job loss, hospital bills, or unexpected home repairs, etc.) you won’t have to worry about losing your home.
• Freeing Up Cash or Reducing Essential Expenses
  For most, a mortgage payment is one of their most significant monthly bills. Eliminating this payment makes it possible to live on substantially less income or to save more toward other priorities, such as your retirement, an emergency fund, or a child’s education.
• High Interest Rate on Your Mortgage
  If your mortgage rate is significantly higher than the interest you could receive on a low-risk investment, it may be worth paying off your mortgage or considering refinancing.
• Peace of Mind
  Owning your own home outright can be liberating, and it’s hard to put a price on the security you may feel as a result. For some, that sense of freedom is worth far more than any potential returns they could earn if they had invested it instead.
• Debt-Aversion
  Even though debt — when used smartly — can be a wealth-building tool, some individuals just don’t like the risk and liability that comes with it. If being debt-free is among your financial goals, then paying off your mortgage is a logical step to achieve that.

How You Can Pay Off Your Mortgage Faster

Even if you don’t have the funds or the desire to pay off your mortgage entirely but want to pay it down faster, there are several options to consider:

• Switch to Biweekly Payments
  Pay half your mortgage every two weeks instead of monthly. This adds one extra full payment per year, helping reduce interest and shorten your loan term. Check with your lender first—some may charge fees or not allow this option.
• Rounding Up Your Payments
  Instead of paying the exact mortgage amount, round up to the nearest hundred. For example, pay $1,500 instead of $1,450. Even small extra amounts—like $100 or $200—can reduce your loan term and interest, especially if applied early and directly to the principal.
• Tack on additional payments
  Add $100–$200 to your monthly mortgage and request it go toward the principal. Doing this early in your loan term can significantly reduce interest and help you pay off your mortgage faster.
• Make Occasional Lump-Sum Payments
  Use windfalls like bonuses or tax refunds to make extra payments toward your principal. This helps cut down interest and will shorten your loan without affecting your regular budget.
• Refinance Your Loan
  Refinancing can lower your rate or shorten your loan term. Even if rates are higher, switching to a shorter term can help you pay off your home faster—just make sure the higher monthly payment fits your budget.

Summary

Whether you choose to pay off your mortgage early or invest your money elsewhere, the key is to align your decision with your long-term financial goals. Take time to evaluate your priorities, risk tolerance, and future plans to determine the path that best suits your personal situation.