Should You Pay Down Your Mortgage Early?

By mercurial9 | mercurial9 | 8 Dec 2021

Many homeowners enjoy the smaller monthly mortgage payments a 30-year fixed mortgage allows them, but others want to pay off their loans as early as possible so they can be debt-free.


Homeowners should be aware that tossing a few hundred dollars toward their principal a few times will have no significance on what they pay in interest. Putting extra money toward your principal only truly makes a difference if you pay extra regularly because your interest is calculated by what you owe on the total principal, not the monthly payment.

Banks usually let their borrowers pay off mortgages whenever they want with no penalties. Paying off a mortgage offers the feeling of financial freedom from debt. Still, it’s not always a wise decision, especially for homeowners who have secured low-interest rates.

As a rule of thumb, paying off a mortgage probably makes financial sense if the rate returns on your other investments are less than the rate you’re paying on your mortgage. Be sure to factor in tax benefits you receive with mortgage interest deduction.

Mortgage holders who have these low-interest rates of 3% to 5% will likely find their extra money would be better put toward other financial priorities – like paying down credit cards, student loans or car loans. They could invest the funds in the stock or crypto markets for a chance of more substantial returns than what they’d save knocking off their mortgage.


But the interest savings can be substantial for homeowners with higher interest rates – who are serious about paying off their and diligent about making extra payments.


Thank you for reading and hope you have a good rest of the day!

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