In many cases the earlier you can pay off your mortgage the better.
Not only do you rid yourself of what is probably the largest debt hanging over your head, but you will usually save thousands in interest. However, paying off your mortgage early is not always the best thing to do, so take some time to think it over.
It often depends on what other debts you have or what type of mortgage you took out in the first place. You can use a free online mortgage repayment calculator to see how changes in your repayment scheme or changes to your mortgage policy will impact your finances, which should help before you settle on a decision.
A flexible mortgage will almost always benefit you the earlier you pay it off. The advantages of this type of mortgage are that you can overpay when you have some spare cash but also take that money back at a later date if you find you are suddenly short of funds, and you won’t be charged any extra fees for doing so.
Depending on your interest rate, you could potentially save tens of thousands of dollars in interest if you manage to pay it off a few years early.
If you have other debts then this could mean it is not beneficial for you to use spare money to pay off your mortgage. The typical mortgage interest rate is somewhere between 4% and 6%.
Credit cards and store cards often charge around 25% to 30%, which is a huge difference. It may seem like you will save money by paying off your mortgage early as this is the biggest type of debt, but over time you will pay more on a maxed out credit card than on a mortgage.
Mortgages are still one of the cheapest ways to borrow money from banks and building societies, so take that into account when making your calculations.
If you have a fixed mortgage it can be less than worthwhile paying it off early. Many banks will only let you overpay by a certain amount each month anyway, and some will have an included early repayment penalty.
WSL Editor’s Note: Having your debts prioritized is always important and I don’t think it would ever be wise to focus on paying your house off before your pay off some of your smaller debts. If you’re a Dave Ramsey fan (like I am), you know that you should focus on your credit cards, student loans, and other small debts, and only make the house a focus once you’re on baby step 5!
The articles are written by personal finance enthusiasts (not certified professionals) based on their personal experience. What works for them may or may not work for you, and you should always consult a financial advisor before making important financial decisions.
In accordance with FTC guidelines, we disclose that we have a financial relationship with companies mentioned in this website. This may include receiving access to free products and services for product and service reviews and giveaways.
Any references to third party products, rates, or websites are subject to change without notice. We do our best to maintain current information, but due to the rapidly changing environment, some information may have changed since it was published. Please do the appropriate research before participating in any third party offers.