Should You Pay Off Your Mortgage Early?

You’ve heard it said that purchasing your home is one of the biggest decisions you make in your life, but not many are talking about how big of a decision it is to pay off your mortgage early. Many have wondered about the merits of paying off their mortgage early, especially if they have been […]...
David Roberts
August 30, 2022

You’ve heard it said that purchasing your home is one of the biggest decisions you make in your life, but not many are talking about how big of a decision it is to pay off your mortgage early. Many have wondered about the merits of paying off their mortgage early, especially if they have been able to lock in an historically low interest rate.

Are you thinking about paying off your mortgage early?

Pros may include:

  • Elimination of, most likely, the largest monthly expense in your budget
  • The chance to avoid unnecessary interest costs, and
  • Simply obtaining a certain peace of mind that’s hard to find these days.

Cons, on the other hand, may include compromising progress toward other goals (e.g., saving for retirement) that need to be prioritized in a long-term financial plan.

There has always been disagreement around this topic, and folks often find themselves lost and uncertain as to what they should do. I have a resource that will help you to gain a more nuanced understanding of why and why not to consider paying off your mortgage early.

Decision making factors and a helpful resource

My “Should I Pay Off My Mortgage?” flowchart covers important decision-making factors you must consider when deciding to pay off your mortgage early. These factors include:

  • Thoroughly weighing the pros and cons involved in this big decision, and how they specifically relate to your financial situation.
  • Recognizing what degree of flexibility you may or may not have after paying off the mortgage.
  • Considering any tax implications that may result from paying off the mortgage.
  • Identifying sound reasons for paying off the mortgage and determining the best course of action if applicable.

Click here to to download this resource

The reality is that the answer to this question probably won’t be cut-and-dry and will likely involve meeting somewhere in the middle. If minimizing debt is important for you, and assuming no prepayment penalties, you can significantly save on interest and shorten the life of your loan by paying extra every month toward your principal. An alternative could be to refinance and shorten the life of your loan (e.g., moving from a 30-year term to a 15-year term) if your cash flow is sufficient and the new interest rate is favorable.

Being too aggressive can make the balancing act more difficult, so that may be something you want to avoid.

Final thoughts about paying mortgage early

Preparing for a rainy day, saving and investing for retirement, and optimizing your debt are all important facets of your overall financial life plan. And as a “life-first” Financial Planner, I would like to discuss this topic with you. Any financial planning decision you make should line up with your personal values, goals, motivations, and the priorities at the heart of your financial plan. Click here to to download this resource

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