A mortgage is likely one of the biggest debts you will experience in your life. It is also a debt that you may not pay off fully for quite some time. This is not inherently a problem as long as you can continue making payments, but there is benefit to be gained from paying off more than the minimum amount due. Understanding the benefits of being free from mortgage debt can be a good motivator to get the payments in, but these are not the sole considerations. You also need to take into account other factors so you can be sure that trying to pay off your debt quickly isn’t going to hurt you afterwards.
Benefits to Paying Off Your Mortgage
As we mentioned, there are many benefits to be gained from paying off a mortgage completely. We discuss some of the main ones here:
Peace of Mind
Even if your finances aren’t tight enough to turn a mortgage into something of despair, getting it paid off is a huge relief. It means not having the looming need of payment at the back of your mind when you consider things like changing jobs or trying something new in business. It means safety and knowledge that you can always have a place to return to no matter what happens to the economy.
More Financial Freedom
Without mortgage payments every month, you will suddenly find yourself with an extra few thousand dollars with which you can do as you please. You can put it towards paying off other debts, invest it, save it for a vacation or rainy day, indulge in a hobby, or any number of other activities.
The extra equity in a mortgage-free home means that you have more freedom when selling and will leave the transaction with more money in your pocket. If you want to upgrade to a larger house, this makes paying for the new property easier. If you’re downsizing, then the extra equity can mean more net profit.
Making Sure You Can Pay Off Early
Although anyone can benefit from being free of mortgage debt, the value of those benefits will vary depending on your individual financial situation. Before deciding to start the push for repayment, ask yourself two quick questions to make sure this is the optimal choice.
Do You Have Enough Savings?
Any money spent on above-minimum payments on your mortgage is money that isn’t being put to use somewhere else. Ideally, you should have enough saved up that you can cover your basic needs for three months to a year in the event of an emergency. It can be tempting to dip into this money to speed up the mortgage repayment, but it’s better to have a cushion to fall back on first.
Do You Have a Higher Interest Debt?
Mortgages are large amounts, but their interest rates are fairly low—around 4%, normally. Many other forms of loans—like credit cards or payday loans—have much higher interest rates and can get much more out of hand if allowed to build. If the choice is between spending extra on your mortgage and clearing a credit card, the card should come first.
Get Repayment Assistance
LUSO Federal Credit Union is a member-owned, not-for-profit financial cooperative dedicated to providing its members with quality financial services and products. We, at LUSO, pride ourselves on serving the financial needs of those who live, work, worship, do business in, or attend school throughout Hampden County, Massachusetts, regardless of economic status. To learn more about LUSO and our services, feel free to contact our Ludlow branch toll-free at 1-844-LUSO-FCU or our Wilbraham branch at 1-800-808-5876.