The Benefits Of Paying Off Your Mortgage Early
Of all the financial arrangements that any individual or couple might enter into, a mortgage is the one that is going to be the largest and most significant commitment. Anyone who wishes to do some financial planning will always have their mortgage front and centre due to the fact that the amount owed will be the greatest, the time to pay it will be longest, and the consequences of defaulting on a mortgage are the most dramatic, given that homelessness is possible.
For most people, the assumption they make is that their mortgage is going to be an obligation that lasts for up to 30 years, and that will usually mean beyond the time when their children have grown up and left home. When you think about it, it means that for around half of a homeowners adult life they are burdened with making mortgage payments.
The simple fact is it need not be that way, at least with respect to the length of time over which you pay off your mortgage. With sensible financial planning, there are options available to you, and actions you can take which can dramatically reduce your mortgage period, and in some cases, it can bring your mortgage period below 10 years. Some of you might be asking, ‘Why would I want to reduce my mortgage period?’ and it is a very valid question. The answers to it are listed below.
-You Become Debt-Free Sooner
-Your Own Your Home Outright Sooner
-Equity In Your Home Increases Quicker
-You Pay Less Interest And Costs
-It Can Improve Your Credit Rating
-You Have More Available Funds After Mortgage is Paid
-Stress Of Making Payments Is Removed Sooner
-You Can Move To A Larger House Sooner
We are sure you will agree that is an impressive list of benefits of paying off your mortgage early. Of course, we must be balanced and highlight that there are also some downsides to paying a mortgage early. These include having to make much larger monthly mortgage payments to do so, and there is the risk that multiple increases in interest rates can inflate those monthly payments even more.
With respect to how you actually reduce your mortgage period, we would highly recommend that you speak to a financial planning expert who can help you both in terms of making the decision, and if you decide to go ahead, helping you to calculate which payment plan is the most appropriate for your circumstances.
The payment plan will obviously take account of your household income and your outgoings. From this and based upon how much you still owe on your mortgage, a calculation will be made that indicates differing repayment periods based on a variety of monthly payment amounts. From this you can then select which one is the most suitable based on affordability and the new mortgage term.
Once you have selected the new payment details, and your mortgage provider has agreed to it, you obviously want to set up the repayments to be automatic. This is much preferrable than you having to physically make the payments manually each month, even that can be done online. This also means that provided that you know the repayments are affordable, that you can literally set them and forget them.
One final point is that you have to remain committed to this new early mortgage repayment plan. It may mean some months you are not able to afford some of your usual ‘extras’, but in the long run ruin, this small sacrifice will be worth it.