The Importance of Paying Off Your Home Mortgage
If you’re like most people who “own” a home, you don’t actually own it yet, technically speaking. You’re making monthly mortgage payments, which means that the lender who you went through to get your original mortgage loan still owns part of it. If your goal is to eventually own your home outright, paying off your home mortgage is key, and doing so can provide you with a number of tangible and highly rewarding benefits, financial and otherwise.
You Save on Interest
Even when interest rates are low, you pay for having a mortgage. A large benefit of paying off a mortgage is you save money — lots of money. By the time most mortgages’ terms are finished, the owner has paid at least twice the actual cost of the house. If you instead pay off that mortgage faster than the length of the loan, you can avoid years of interest. In other words, if you pay the loan off faster, that’s extra money that goes straight into your pocket.
As long as you have the mortgage, however, the money you spend on interest only helps the company that gave you the loan. You do get a tax break on that interest, but the amount of total interest you save by paying off the loan faster far outweighs whatever tax break you might get. You save more money paying off your mortgage, period.
You Lower Your Living Costs
Most people pay somewhere between 20 and 35 percent of their monthly income on their mortgage — more if they’ve overextended themselves and bought a house they can’t really afford. So another benefit of paying off your mortgage is that you no longer have that cost. Sure, you will still have to pay taxes and repairs when they’re needed. But you’ll be free and clear of the single largest cost of living each month — paying for a roof over your head.
You Protect Yourself Against a Bad Economy
As the housing crisis that started in late 2008 shows, a bad economy can severely decrease the value of your house. If you have a mortgage on your house, you can end up owing more money than the house is worth when the economy goes sour. But if you pay off your mortgage, you’re far better protected from economic changes. Even in a worst-case scenario, you can still sell the house and be certain that you will get every dollar of that sale.
You Can Spend Money on Other Investments
When you have a home that you own, the money you would have spent on the mortgage is free to be spent elsewhere. You can save it or invest it or use it to pay for your child’s college tuition. Paying off your mortgage lets you spend money on other choices and gives you flexibility in any financial situation.
Best of All, You Have a Home
The greatest benefit to paying off your mortgage comes from truly owning your home. Every night, you can sleep well knowing your home is your property, for as long as you want to live there. That’s knowledge that is worth paying off your mortgage as fast as possible.