Whether you're a first-time homebuyer or an experienced homeowner, your mortgage will undoubtedly play a significant role in your financial life.
Various financial situations such as getting promoted, reaching your savings goals or unexpectedly possessing a bit of spare cash can have you leaning towards paying off your mortgage early.
As tempting as it is to pay off your mortgage early, this is a huge decision that should not be taken lightly! Before you take the leap, you should have a firm grasp of the advantages and disadvantages of doing so.
That is what we are here for.
Continue reading to take a look at the advantages and disadvantages you should consider regarding early repayment of your mortgage.
The Advantages of Early Mortgage Repayment
If paying off your mortgage early is a confident financial decision and one you are ready to make, you are certainly not alone. There are numerous advantages to repaying your mortgage early, such as:
Debt-Free Living
Reduction in Interest Payments
Extra Cash in Your Pocket
And the list goes on!
Repaying your mortgage is a financial decision that many make based on these advantages alone. However, it is important to take a look at the whole picture of repaying your mortgage before taking the leap.
The Disadvantages of Early Mortgage Repayment
While living debt-free in your own home is a desirable opportunity many want to embark on, there are a few disadvantages of early mortgage repayment that you should consider before making such a drastic decision. A few disadvantages include:
Decreased Short-Term Cash Savings
Lack of Investment Diversity
Loss of Other Investment Opportunities
If those disadvantages are aspects that you are familiar with and have come to terms with, it is now time to move on to whether early mortgage repayment is a wise option for your financial best interest.
How to Decide to Pay Off Your Mortgage Early
Everyone’s financial situation is different, and we understand that! That is why we want to provide you with insight and things to consider so that you can make a well-informed decision based on your needs.
Here’s a series of question prompts that you may ask yourself to assess your unique situation and assess the advantages and disadvantages of early mortgage repayment.
Consider asking yourself the following questions:
If I pay off my mortgage tomorrow, will I have enough savings to handle emergency expenses should they arise?
Have I already paid off any other high-interest loans/debts?
If I pay off my mortgage tomorrow, will I still be able to contribute to my savings accounts each month?
After asking yourself these questions, if you found that you responded confidently “yes” to all of them, you should consider speaking with your lender to discuss paying off your mortgage early!
If you were in between “yes” and “no” with your answers, or feeling not as confident as you were at the beginning of this article, we recommend shifting your focus to prioritizing debt repayment and growing your savings.
Get Mortgage Advice from Arise Mortgage
When it comes to mortgages and finances, it is not one-size-fits-all!
It is best to speak with an expert mortgage broker to assess your situation, and discover the best course of action for you and your finances.
Interested in learning more? Get in touch with our team today. We’d be more than happy to help!