Paying Off Mortgage Early, Pros & Cons

Regardless of whether you have a fifteen, thirty, or fifty year mortgage, paying it off early can save a great deal of money in the long run. However, paying off a mortgage early has both pros and cons, which vary to some extent depending upon the type of mortgage.


The positive aspects of paying your mortgage off early include lower and more predictable monthly expenses, as well as less overall cost in interest. If your mortgage is paid off early, you will no longer have to worry about making the monthly payments; this makes it easier to retire or spend time on efforts which don’t produce an immediate economic benefit.

It can also greatly reduce the amount of money spent on interest. The amount of interest paid during 30-year or longer mortgages is typically more than the principal. You also won’t need to be concerned about potential interest rate increases in the future.


There are also some drawbacks. You won’t have the money used for paying it off any more; it will no longer be possible for you to use the money for making large investments, purchasing another property, buying an automobile, paying off other debts, etc. However, there will be hundreds (perhaps thousands) of dollars more in available income each month.

You may have other debts which are more important to pay off early than your mortgage. For example, if you have thousands of dollars in credit card debt at eighteen percent interest, it is costing you more than an equivalent amount of mortgage debt. Be sure to compare the interest rates on any other debts as well, such as auto or student loans, and consider whether or not they are adjustable, as well as their late payment policies.

Another potential drawback is that some mortgages have prepayment penalties. This means that you must pay a substantial fee if the mortgage is paid off early; be sure to determine if this applies to your mortgage before considering whether or not to pay it off early. It may still be worth paying the fee if it is not especially large, when the amount of interest you will save is taken into consideration.

Overall, the pros of paying off your mortgage early usually outweigh the cons, but prepayment penalties or less ability to immediately pay other large expenses can be problems for people in some financial situations.

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on December 28th 2007 in Home Buying Tips

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