Free up extra cash: Pay off your mortgage early
It’s not easy, but the savings are worth the effort
Signing a mortgage is quite the commitment. While paying off a mortgage early is easier said than done, here are a few good reasons to eliminate that debt sooner than you technically have to.
1LESS
FINANCIAL STRESS IN RETIREMENT
Countless seniors struggle to pay bills in retirement, so much so that an estimated 25 million of them live below the poverty line. Since housing is one of the greatest expenses seniors face, it stands to reason that taking your mortgage payment out of the mix can make for a more financially secure retirement.
While paying off your mortgage early won’t eliminate your housing costs entirely in retirement — you’ll still have property taxes, insurance and maintenance to deal with — it will ease the burden at a time in your life when money is limited.
2FREE UP CASH FOR COLLEGE
One reason so many households struggle to pay for college (aside from the exorbitant price tag, of course) is that their existing bills don’t magically go away by the time those tuition payments come due. But if you manage to pay off your mortgage by the time your kids go to college, you’ll have extra cash on hand to cover those costs. Freeing up cash for college will help you and your children avoid hefty loans — loans countless borrowers struggle to pay off.
3SLASH
INTEREST COSTS
Mortgage lenders make money by collecting interest, so the sooner you pay off your home loan, the less it’ll ultimately cost you.
Imagine you have a 30-year, $300,000 fixed mortgage at 4% interest. Now let’s say that 10 years in, you make an extra $10,000 payment toward your principal. That move alone will save you close to $12,000 in interest.
uOne final thing: While paying off your mortgage early can open the door to major savings and give you more financial flexibility, make sure your loan doesn’t impose penalties for prepayment. While most mortgages don’t penalize borrowers for paying off their debt early, some do.
While paying off your mortgage early won’t eliminate your housing costs entirely in retirement, it will ease the burden at a time in your life when money is limited.