Early Mortgage Pay-Off seems like an enticing move since it relieves you from an ongoing financial burden. However, a top-ranked Realtor suggests you carefully think over this decision to avoid drawbacks.
Thus, first, weigh the pros and cons of paying off a mortgage earlier. Also, know some best Realtor tips on proceeding through this step for fruitful outcomes.
Early Mortgage Pay-Off Pros and Cons, According to Top Ranked Realtor
Understanding the pros and cons of early mortgage pay-off helps you check if it suits your financial situation. You can then see if it will bring great perks or unwanted disadvantages.
- Pros of Paying Off Your Mortgage Earlier
1. Remove a Significant Financial Burden
Clearing off your mortgage loan removes a significant financial worry from your household.
It gives you peace of mind knowing that you don’t need to prepare the monthly budget for the loan anymore. And you also don’t need to deal with the lenders regularly.
2. More Budget for Other Household Expenses
Removing a financial burden also means pumping up your monthly household budget. You will get more cash for utilities, food, emergency expenses, and savings, among other financial responsibilities.
Thus, many homeowners pay off mortgages while they still enjoy stable incomes. They want to have a more manageable household budget upon retirement.
3. Have Extra Cash for Investment
Some homeowners pay off their mortgage immediately because they want to get extra cash for investment.
The top-ranked Realtor thinks it’s a possible early mortgage pay-off advantage so you can make your investment at the right time. And it’s a valuable perk when you are up for a high-risk investment such as stocks.
4. Increase Your Home Equity
Home equity is the difference between your outstanding mortgage and current home value. So, your equity will grow the more you pay your mortgage loan.
The good thing is, that you may refinance your mortgage and borrow against your home equity. The more equity you have, the higher amount you may get.
5. Eliminate Private Mortgage Insurance
Private Mortgage Insurance (PMI) protects the lender when a borrower defaults on the mortgage loan. It’s an additional charge you must pay along with your monthly mortgage.
Usually, you will stop paying PMI once you reach 20% of the mortgage. So, quickly paying off your mortgage eliminates PMI earlier as well.
- Cons of Paying Off Your Mortgage Earlier
1. Tighter Budgetting while Paying Off the Mortgage
Yes, you may enjoy excellent benefits after paying off your mortgage earlier. However, you may face a financially challenging situation during the process because you must allocate more cash to the mortgage.
Thus, consult a financial expert to ensure you are ready for this option.
2. Lose Tax Deduction Opportunities
Paying mortgage interest lets you claim deductions when filing annual tax. And you will lose these tax intensives after paying off your mortgage.
3. Slight Reduce on Credit Scores
It’s a great thing that you pay your mortgage. However, lenders also want to see you’re paying loans on time.
It’s why quickly paying off your mortgage slightly reduces your credit scores.
Crucial Tips on Quickly Paying Off Your Mortgage
Remember these top-ranked Realtor tips when paying your mortgage earlier. It will help you enjoy the benefits while minimizing the drawbacks.
1. Start by consulting with a financial adviser. They are the experts to call while planning a significant financial decision, such as quickly paying -off a mortgage.
2. Ask the lender if they charge prepayment penalties. Some lenders ask for this fee when you pay off a mortgage earlier. Remember that lenders want you to continuously pay through the life of the loan for their profit. In other words, this fee protects their interest.
3. Prepare your finances before taking this option. You have to pour more cash towards the mortgage. Thus, you may need to constrain your budget for other expenses throughout the process.
4. Consider different options for quickly paying-off mortgages. For example, you may pay an additional amount each month. You may also arrange a different payment scheme, such as by-weekly instead of by-monthly payments.
5. Inform the lender and their agent’s that you are paying an additional amount for the principal. If you won’t, they will assume that the additional amount is for the next month’s interest. Remember that you want to pay off the principal to clear your mortgage.
Keep these Top Ranked Realtor Notes to Quickly Pay Off a Mortgage
Paying off your mortgage earlier is a significant financial decision to make. Thus, carefully plan your step to ensure of grabbing fruitful results.
Call a reliable financial adviser to guide you with this option. You may also connect with a top-ranked Realtor for some suggestions.
Ed Constable works hard to provide the best experience he can for buyers and sellers, simply because his goal is to be reliable, persistent, and passionate in all areas of life.
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