August 4, 2021
On the surface, paying off your mortgage seems like a no-brainer.
It’s become a staple of personal finance advice that everyone should eliminate their mortgage ASAP.
But here’s the truth—there are some drawbacks to eliminating your mortgage quickly. Read on for the pros and cons of paying off your mortgage early.
The pros of paying off your mortgage early. Your mortgage can be a serious drain on your financial resources. Those monthly payments can hamper your ability to save, build wealth, and enjoy the lifestyle you desire. It makes sense that the sooner you eliminate those payments, the sooner you’ll have the cash flow to make your dreams a reality.
You might also save a significant amount of money in interest by paying off your mortgage early. The less time your mortgage accrues interest, the less you’ll pay overall.
Perhaps most importantly, eliminating your mortgage creates peace of mind. So long as you’re paying off a mortgage, you’ll always run the risk of defaulting and losing your home. Owning your house outright can greatly reduce this danger and the stress that comes with it.
The cons of paying off your mortgage early. But eliminating your mortgage is not necessarily an unalloyed good. There are a few downsides to consider, too.
What if, instead of devoting your financial resources towards your mortgage, you saved them at a high interest rate?
There’s a chance you would actually walk away with more wealth. That’s because the sooner your money starts compounding interest, the greater potential it has to grow.
When you should and shouldn’t pay off your mortgage early. Paying off your mortgage early might be viable if your mortgage makes up a small fraction of your monthly expenses. So long as it doesn’t interfere with your other savings goals.
However, always consult with a financial advisor before you make this decision. They can determine if eliminating your mortgage quickly will derail your wealth building strategy!