Last week, we compared renting to buying.
I wrote about powerful strategies for paying off your mortgage early.
That’s for those of you who decided to buy.
But, before you decide to pay off your mortgage early, you need to ask yourself a very important question:
Should you pay your mortgage off early?
Some people believe paying off your mortgage early is dumb. Let’s see why they think that…
Why is it Dumb?
I have read the articles on why you shouldn’t pay off your mortgage early and why it is “dumb” to do so.
Those arguments, for the most part, are pretty terrible.
Obviously, check to see if you have a pre-payment penalty, but if it isn’t that high, it may still be a good idea to pay your mortgage off early.
Don’t Pay Off Your Mortgage Until…
One of the main things people will say about paying your mortgage off early is that you need to have the rest of your debt paid off first.
Really? Is that not obvious?
What should be paid off before you start aggressively attacking your mortgage?
Just about everything.
- Personal loans
- Credit card debt
- Student loans
- Auto loans
- Medical bills
…to name a few.
Your mortgage should be the last debt you pay off.
I actually read an article that explained how you shouldn’t pay off your mortgage early, because your finances could “go south” and you may need to take out the extra equity you’ve put in. Come on, people! That’s why you have a fully-funded emergency fund before you start pouring money into mortgage payments.
Do This First
It’s equally important to set yourself up for success before you pay off the mortgage.
So do this before you begin to aggressively pay off your mortgage:
Many people will also tell you that you need to make “sufficient contributions” to your children’s education accounts, but obviously that is up to you. Don’t feel like you “need” to do that before paying off your home. It’s not your responsibility to pay for your children’s education, but it is nice and [hopefully] they will appreciate it.
Why You Should Pay Your Mortgage Off Early
Once your home is paid off, you [usually] cut out your biggest payment.
Talk about setting yourself up for success.
Just picture it…
You now own a huge asset that is paid in full. Your home is no longer the liability it once was since you no longer paying for it.
Sure, you have maintenance costs and repairs, but when your home is paid off and you have a fully funded emergency fund, your cashflow can take care of most of those expenses.
This should get you excited about paying off your mortgage:
- You can live in a home that you own instead of a home the bank owns.
- You have the option to sell you home for pure profit.
- You can live on much less since you lost that huge payment.
You can’t set yourself up much better than that.
The Verdict is In
Yes, you should pay your mortgage off early.
Once you have done everything mentioned here, get to work!