Deciding and finalizing to buy a home is always a big and encouraging decision of life. But after that you have signed the dotted lines and taken a mortgage loan, when it comes to paying the installments, you realize what you have done. Mortgage accounts for the biggest personal debt of our life.
If you have a large amount of cash, as a borrower you should always aim to pay off your mortgage early, and want to reduce your overall interest expenses. This is because, when you take a loan for buying a house or property, you get finance on the property on its 80% amount. But the total cost of the loan that you repay is not just the actual price tag of the home, but it also includes interest on the loan amount, which you can calculate anytime using the mortgage equity accelerator calculator.
It might seem quite natural for everyone availing mortgage loans to pay off their mortgage as early as possible. But do you know, that early repayment only makes sense, if you can save money and achieve your long-term financial goals. As with anything else, repaying mortgage loans early also has its advantages and disadvantages. It is why you should make sure that the decision of paying off early is best for you when the situation is such that you divert funding from savings and extra cash.
The benefits of mortgage pay off those banks do not want you to know
Paying off your mortgage can be of great help if you want to reduce the overall interest you pay in your mortgage loan or free up some cash for any other purpose. Every month you land up paying extra interest on the total balance of your loans still left. By paying off your balance mortgage loan amount early, you avoid all the added years of extra payments that are being charged on the loan amount. Depending on how much, you still have left to be paid, you can save thousands and lakhs of rupees.
- It helps to handle other debts that you might have
One of the biggest advantages of paying off your mortgage early is the financial security and that too for the long-term. You will have extra room to breathe in your budget when you do not have a mortgage to pay. You can redistribute your earning is the clearing your pending bills and other debts that you may have.
- Paying off a mortgage early helps to reduce the cost of interest
The rules are simple with mortgage loans – the longer is the loan tenure the larger is the interest that you land up paying. This is a huge financial liability of mortgage takers – the hefty cost of interest. So, your bank will never want you to pay off your mortgage early, especially if you have availed the mortgage at a higher rate of interest.
- You stay protected when the housing market is unstable
Paying bank financial institutions during tougher times or at times of financial recession is one of the major concerns of homeowners. But, if you have the money to pay off your mortgage, then in situations of financial emergencies or instability, you are free of a huge monthly burden.
- You have more financial freedom
Assuming that all your debts are clear and you have paid off your mortgage loan, you have the greater financial freedom to pursue any other venture that requires funds. Traveling or marriage or anything that requires a lot of money can easily be fulfilled, with greater financial freedom.
- You are the outright owner of your home
It’s very simple. When there is no mortgage loan pending on your home and you have paid it off entirely, you are the sole owner of your house. You do not have to live under the fear of it being forfeited by the financial institution, in case you have defaulted on your loan.
There are many ways of paying off your mortgage early like refinancing and using HELOC to pay off the mortgage. But paying it off early is a dream come true for many homeowners. But, if at all you get the chance and it is within your reach, you and your family should start making the move and clear off your balance.
Not only will this help you free up from the burden of monthly payments, but will also aid you with added social and financial security, you will save thousands and lakhs of rupees, and you will be in a better position to chase down your dreams.
Your decision is not limited to the above-mentioned two options, many other options can not only shorten your loan term, but can also lower your monthly payments, and let you have more cash to save for retirement and other ventures.
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