{"id":86,"date":"2022-09-22T12:12:31","date_gmt":"2022-09-22T12:12:31","guid":{"rendered":"https:\/\/www.privamortgage.com\/blog\/?p=86"},"modified":"2023-09-14T06:24:42","modified_gmt":"2023-09-14T06:24:42","slug":"dont-do-these-4-things-when-paying-off-your-mortgage-early","status":"publish","type":"post","link":"https:\/\/www.privamortgage.com\/blog\/dont-do-these-4-things-when-paying-off-your-mortgage-early\/","title":{"rendered":"Don\u2019t Do These 4 Things When Paying Off Your Mortgage Early"},"content":{"rendered":"

Paying off your mortgage early can be the best feeling. You are finally mortgage-free and own your house! Your net worth instantly increases, and you no longer have to worry about paying interest on a loan.<\/span><\/p>\n

It can be a great feeling, but did you know there are mistakes you can make when paying your mortgage off early?<\/span><\/p>\n

If you don\u2019t do it right, paying your mortgage off before it\u2019s due could cause financial strain.<\/span><\/p>\n

Here\u2019s what you should know.<\/span><\/p>\n

How to Pay Off Your Mortgage Early<\/span><\/strong><\/h2>\n

Before we get to the mistakes you can make when paying your mortgage off early<\/strong>, you should know how to pay your mortgage off faster.<\/span><\/p>\n

The easiest way is to make extra payments each month. It doesn\u2019t have to be a specific amount. You can pay $50, $1,000, or however much you want toward your mortgage. You might pay more for some months than others if you have variable income. The key is to allocate the funds to your principal balance, and you\u2019ll instantly decrease the interest you pay on your loan.<\/span><\/p>\n

If you want a more structured method, here are some ways to pay your mortgage faster:<\/span><\/p>\n

\u00b7 Make one extra payment per year \u2013 Make one payment equal to a mortgage payment in addition to your regular payments. For example, if your mortgage payment is $1,000 monthly, make one extra $1,000 payment each year.<\/span><\/p>\n

You can divide it equally and pay an extra $83.33 monthly or $1,000 at once.<\/span><\/p>\n

\u00b7 Make bi-weekly payments \u2013 Divide your regular mortgage payment in half and pay that amount every two weeks. There are 52 weeks in the year, so you\u2019d make 13 monthly payments or one extra mortgage payment each year.<\/span><\/p>\n

\u00b7 Put windfalls toward your mortgage \u2013 If you receive a large tax refund, put it toward your mortgage rather than spending it. Most lenders allow you to pay the principal balance down at any time. Lowering your principal balance reduces interest costs and helps you repay your loan faster.<\/span><\/p>\n

4 Things to Consider Before Paying Your Mortgage Early<\/span><\/strong><\/h2>\n

It might seem like the right thing to do to pay your mortgage off early,<\/strong> but consider these factors first.<\/span><\/p>\n

\u00b7 Do you have an emergency fund?<\/strong><\/h4>\n

Typing up your liquid funds in your home can lead to financial issues if you have an emergency. Make sure you have money saved to handle your monthly expenses for three to six months before using your extra money to pay your mortgage early.<\/span><\/p>\n

\u00b7 Have you invested in your retirement?<\/strong><\/h4>\n

Your home may be your retirement, but you should also have a retirement fund. If you haven\u2019t contributed to your 401K or IRA<\/a> in a while, use your extra funds to load up your retirement account before investing it in your home.<\/span><\/p>\n

\u00b7 Is your employment stable?<\/strong><\/h4>\n

Also, look at your employment. Does it seem stable? No one can predict the future, but you\u2019ll know if your job is your \u2018forever\u2019 job or if it is temporary until you find something better. If you aren\u2019t satisfied with your employment, don\u2019t pay your mortgage early.<\/span><\/p>\n

\u00b7 Do you have a lot of high-interest debt?<\/strong><\/h4>\n

If you have a lot of high-interest consumer debt, pay that off first before paying off your mortgage. Credit card interest almost always surpasses mortgage interest. You\u2019ll lose money if you invest in your home and keep the credit card debt.<\/span><\/p>\n

Advantages of Paying Your Mortgage Off Early<\/span><\/strong><\/h2>\n

\"Benefits<\/p>\n