7 Times It Makes Sense to Pay Off Your Mortgage Early

Couple at home
Rocketclips, Inc. / Shutterstock.com

Most people need a home loan to get the dwelling of their dreams. It is the one form of debt that financial experts typically do not frown upon.

However, there are times when it makes sense to pay off your home loan early.

Reducing the time it takes to retire your mortgage may help free up monthly income for other purposes. What follows are examples of when it pays to pay off a mortgage ahead of schedule.

1. You’re tired of paying interest to a lender

Couple Getting Mortgage
bernatets photo / Shutterstock.com

Lenders earn money by collecting interest on loans. That means the longer it takes to pay off your home loan, the greater the profit your lender will realize.

If you bought a home using a 30-year, fixed-rate loan, consider trying to pay off the loan in 15 years instead. You’ll probably need to make short-term financial sacrifices to come up with the extra cash, but you’ll save many thousands of dollars in interest costs if you do.

2. The weight of your mortgage payments is causing you stress

Couple tearing their hair, looking at a piggy bank.
Inesbazdar / Shutterstock.com

Taking on a home loan is a major commitment. It means you must come up with a monthly payment for up to three decades, no matter what other financial challenges you may face.

“People definitely suffer from lots of different kinds of financial stress, and your debt and mortgage is a big part of that,” John Bodrozic, co-founder of digital home management platform HomeZada, tells Money Talks News.

If you miss payments, your home might go into foreclosure, putting your investment at risk. If worrying about paying the mortgage keeps you up at night, end the agony by coming up with a new payment plan that retires the debt early.

3. You want to free up monthly income for retirement

Retiree with money
Africa Studio / Shutterstock.com

A home loan typically is the largest single financial obligation people face. Many homeowners strive to pay off their mortgage before reaching retirement age. That way, they can reduce monthly expenses before they quit their jobs and begin living on fixed incomes.

Paying off a 30-year mortgage before retirement can be a challenge. The reward is that you’ll have more disposable income in old age.

“It’s important to have few monthly bills so you can enjoy your retirement and do all the things you wanted to do when you retired,” Randall Yates, founder and CEO of online lending marketplace The Lenders Network, tells Money Talks News.

If you can’t quite pay off the mortgage at this moment, at least consider getting a home loan with a lower rate. Stop by our Solutions Center to compare your mortgage refinance options.

4. You’re planning to put your kids through college

ESB Professional / Shutterstock.com

If you have children who will attend college while you are paying off a home loan, you may face a tough financial burden.

However, paying off your home loan early will give you more flexibility to address college costs.

5. You want to gain access to your home’s full equity

Home equity loan
Andy Dean Photography / Shutterstock.com

Paying off a home loan early gives you the financial security of having access to your home’s full equity, the market value of your property. That means you’ll have a ready source of cash to address unexpected expenses.

“If you’re ever in a tough spot, you can always get a home equity loan and access most of your home’s value,” Yates says.

Just remember that tapping into home equity isn’t free. It requires you to take out a loan that will need to be repaid.

6. You want the freedom to explore new opportunities

Small business
Nestor Rizhniak / Shutterstock.com

When you’re making payments on a home, it limits your ability to explore career opportunities. Giving up a dependable, steady job to try a new profession or to return to school can be a risky venture.

If you can pay off a home loan early, you’ll have fewer financial obligations and more freedom to pursue dreams. These might include starting a business or embarking on a new career.

Once your loan is paid off, you get “a double win,” says Bodrozic. Your monthly expenses will drop and your home will become a financial asset you can draw on.

7. You’re not comfortable carrying a large debt

pathdoc / Shutterstock.com

For people who are averse to debt, owning a home free and clear is a benefit that can’t be measured in dollars and cents.

Holding the title to your own dwelling can bring you a sense of security and peace of mind. You’ll know that even if you suffer a financial setback, the home will be yours. Because residential real estate typically appreciates in value over time, paying off a home loan early is a sound long-term investment.

Once you pay off the mortgage, “you’ll have thousands of dollars each year that you can use for vacations, paying off credit card debt, or investing to build wealth,” Yates says.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
These Medicare Expenses Will Jump in January
These Medicare Expenses Will Jump in January

Some Medicare premiums and deductibles will take a bigger bite out of Social Security payments next year.

8 Things I Always Buy at Target
8 Things I Always Buy at Target

I grew up shopping at the original Target store and am a lifelong fan. Here are my favorite purchases.

9 Ways to Get Affordable Vet Care
9 Ways to Get Affordable Vet Care

Medical care for your furry friends can be expensive. Here are some tips to get affordable vet care.

Never Buy These 10 Things With Your Credit Card
Never Buy These 10 Things With Your Credit Card

Credit cards offer many conveniences and protections, but sometimes it’s simply smarter to keep the plastic tucked away.

33 Home Upgrades That Cost Less Than $100
33 Home Upgrades That Cost Less Than $100

A little money goes a long way with these imaginative projects. You can do most of them yourself.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Whether you resell it for a big profit or add it to your own wardrobe, this type of clothing is a hidden steal.

10 Things Frugal People Never Buy
10 Things Frugal People Never Buy

If you’re a true tightwad, the mere thought of spending money on these items gives you the willies.

This Simple Mistake Might Weaken Your COVID-19 Vaccination
This Simple Mistake Might Weaken Your COVID-19 Vaccination

Avoid doing this before you get vaccinated.

7 Social Security Benefits You May Be Overlooking
7 Social Security Benefits You May Be Overlooking

There’s more to Social Security than retirement benefits.

10 Cars You Are Most Likely to Keep for 15 Years
10 Cars You Are Most Likely to Keep for 15 Years

The cars that owners hold onto the longest have one thing in common, a new study shows.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

The 6 Best Investing Apps for Beginners
The 6 Best Investing Apps for Beginners

If you’re looking to ease into investing in the coronavirus economy with just a little money, check out these easy-to-use tools.

7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

10 Deep Discounts Available on Amazon This Friday
10 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

9 Things You Should Never Leave in a Car
9 Things You Should Never Leave in a Car

Thinking of leaving these possessions in a car? Prepare for unexpected consequences.

13 Amazon Purchases We Are Loving Right Now
13 Amazon Purchases We Are Loving Right Now

These practical products make everyday life a little easier.

9 Mistakes People Make When Cleaning With Vinegar
9 Mistakes People Make When Cleaning With Vinegar

Cleaning with vinegar can save you a lot of money, but using it like this can cost you.

8 Things You Should Replace to Improve Your Life Today
8 Things You Should Replace to Improve Your Life Today

Being frugal isn’t smart if you put off replacing these items.

7 Income Tax Breaks That Retirees Often Overlook
7 Income Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

10 Things Successful Retirees Do Differently
10 Things Successful Retirees Do Differently

These habits and characteristics can help put you on the track to success.

7 Costly Health Problems That Strike After Age 50
7 Costly Health Problems That Strike After Age 50

As we age, our bodies wear down. Here is how to cut costs associated with some common ailments.

29 Purchases That Can Save You Money Every Day
29 Purchases That Can Save You Money Every Day

Sometimes, you’ve got to spend to save.

5 Changes to Your Federal Tax Return Form in 2021
5 Changes to Your Federal Tax Return Form in 2021

The new Form 1040 features two new tax breaks, among other changes.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.