Should you pay off your mortgage early?

That's a question that many people struggle with, whether they are already paying on a mortgage or are working with our real estate agents to find a home to buy.

The answer to that question isn't the same for everyone since it depends largely upon each person's financial situation, as well as their long-term goals and preferences. Here are three things to consider as you determine whether or not paying off your home early makes sense for you.

1. Do you have other debt?
   Given today's low-interest rates for traditional, fixed-rate home loans, chances are good that any other debt you are carrying, be it credit card debt, student loans or auto loans is more expensive than your mortgage. If you are carrying debts with higher interest rates, it makes good financial sense to channel any extra funds you have into paying these off before you worry about making extra payments on your mortgage.
   
   
2. Will paying off your home early leave you cash-strapped?
   There is no harm in doing without a few luxuries to pay off your home more quickly, but you'll want to evaluate your budget carefully to be sure that making extra mortgage payments doesn't leave you on shaky financial ground.
   
   Leaving yourself cash-strapped to get it done can be risky business if the unexpected happens, like a job loss, for instance, or health problems. It can also cause you financial problems later in life if you're scrimping on retirement savings to prepay your mortgage.
   
   Before you commit a more substantial chunk of your budget to pay down your home loan more quickly, put some money away for a rainy day. You should save enough to cover your ordinary expenses for at least six months, but preferably a year. Also, be sure that money goes into your retirement fund every month before you send that extra payment on your home loan.
   
   
3. Will your mortgage term stretch into your retirement years?
   Most of us will see a significant decrease in income once we retire. If your loan, should you pay just as scheduled, will still be around when you retire, it may make sense for you to get your home paid off early. Owning your home free and clear by retirement age will pay off by reducing your monthly expenses significantly, right when you likely have less income to meet them.

The bottom line is that, if you can comfortably afford to pay off your home early, it makes sense to do so. You'll save money over the long-term by paying less interest, and you'll also have the peace of mind that comes with having clear title to your home. However, if paying more towards your mortgage will cause undue financial strain, it probably makes better sense to keep up with those agreed-upon monthly payments.

If you have more questions about the pros and cons of paying your home off early, please feel free to contact us. We're always happy to put our expertise and experience on all things related to home ownership to work for the benefit of New England homeowners and home buyers.