Towards a Stable Financial Future: 4 Pros and Cons of Paying Off Your Mortgage Early

Buying your own home is a major financial decision and almost as soon as you have signed on the dotted line and agreed a mortgage deal your thoughts might start to turn to how you can pay this huge debt off as quickly as possible.

Getting yourself into a position where you are the owner of your property and don’t have to pay a mortgage every month will often give you the feeling of greater financial freedom and prosperity, so is it a good idea to formulate a plan to pay the loan off early?

Here are some key points to consider if you are contemplating paying off your mortgage.

Eliminate years of interest charges

When your lender agrees to sanction a loan so that you can buy a property they will charge interest on the amount you borrow from them.

You can search out mortgage deals online at sites like and it does make sense to shop around to try and find the best possible deal.

The reason for this is that interest rate charges can add up to a significant sum of money that you have paid over and above the original amount borrowed on your mortgage.

If you can pay off your mortgage early, even if it is only a couple of years ahead of time, you will be eliminating these interest charges and making some significant savings overall.

The earlier you can pay off your mortgage debt the more you will save on interest charges, and this could help put you in a better financial position, especially if you are planning on retiring as soon as you can.

Be mindful of the fact that you will be paying interest on the total balance outstanding and any way to clear your mortgage debt before the designated end date should be looked at if you want to save on interest costs.

More spare cash

Another major plus point to consider when making a case for paying off your mortgage early is the fact that without this significant debt burden to worry about any more you should have a lot more spare cash in your bank each month.

Mortgage payments tend to represent a significant percentage of our monthly outgoings and if you can find a way to clear this debt and pay off what you owe on your home it should make a considerable difference to your financial health.

Paying a mortgage can put a noticeable strain on your household finances and the positives related to settling what you owe to your lender include being able to put more of your money toward saving for your retirement.

Instead of paying interest on your mortgage loan you will then be earning interest on the money you invest, so you could enjoy seeing your money go further once your home loan becomes a thing of the past.

Another strategy to consider would be making a partial payment against your mortgage balance.

Paying a lump sum off what you owe will have the effect of lowering your mortgage interest charges and giving you more equity in your property. If you have a certain amount of money available but it’s not enough to pay off the total amount you owe, paying a lump sum will improve your financial strength as a result.

Why it is not a good idea to have your cash tied up in property

Although you might think that there can only be positives attached to paying off your mortgage early it doesn’t hurt to look at both side of the argument and weigh up the pros and cons.

There are a couple of potential negatives to think about if you are contemplating the idea of paying off your mortgage early and are in a position to do so.

Using your available cash reserves to pay off all or part of what you owe on your mortgage could actually put you in a vulnerable cash position, especially if you need to get your hands on some cash in a hurry.

There might be a financial emergency that you have to contend with, such as facing a big unexpected repair or tax bill and if you don’t have enough spare cash left you might have to resort to borrowing the money, which could prove expensive.

If your money is tied up in your property it is difficult to get your hands on that cash in a hurry.

If your cash reserves are going to be seriously depleted as a result of clearing off your mortgage balance you might want to think twice before handing over that extra money to your mortgage lender.

Clearing your mortgage debt might not be tax efficient

Another worthwhile point to think about that could turn out to be a negative aspect is that paying off your mortgage early will remove your option of claiming tax deductions on your interest payments.

Depending on where you live you might be entitled to write off interest on your home loan and you would wipe out this tax advantage in an instant once you settle your mortgage debt.

It could also be argued that there are better options when it comes to making the most of available tax allowances.

One example of this would be that if you do have some spare cash it might be put to better use by being invested in your retirement fund. Putting your money into owning your own home rather than toward your retirement pot could, ironically, turn out to be a decision that costs you lost interest.

One final point to remember would be that paying off your mortgage early could be a negative factor on your credit profile.

Lenders like to see that you can handle the responsibility of borrowing money and paying off your mortgage could have the effect of lowering your credit score. This is because lenders like to see that you are active and it helps them to see you with a more active credit history than a reducing one.

If you think you might want to access a credit product in the future, remember that paying off your mortgage early could hinder those ambitions.

Consider all the pros and cons attached to paying off your mortgage early so that you can make a decision that is right for your circumstances if you find yourself in a cash position to think about this option.


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