Current conditions in the housing market have led some homeowners to consider strategies that may help them pay off their mortgage early, as getting out of debt from one’s home loan payment obligation has been a major goal for numerous homeowners, especially over the past months when problems like negative equity may have arisen, homeowners have become uncertain over their employment future, or in instances where homeowners simply want to save more money in the long run, quickly erasing a mortgage obligation has been the main focus of these individuals. However, we have seen some problems arise or situations present themselves when homeowners pursue early repayment of their mortgage debt, as it will not always be a homeowner’s best financial interest to take these steps.
What some homeowners may overlook if they are in a position to pay off their mortgage early is the fact that their home loan agreement may charge penalties to a homeowner if they do pay off their mortgage early, and while this may not be substantial in some cases, homeowners may need to calculate the amount they will pay in total, meaning principal and interest, versus the lump sum they pay to erase their debt early plus the penalties that may arise to see whether paying off their mortgage early will be best. In some cases, homeowners may see that the penalty they pay for erasing their mortgage debt early may offset some of the benefits from doing so, and there are arguments by some financial advisers who say that money that would go towards these penalties could be well spent elsewhere.
As an example, there are some concerns by financial planners that consumers are not doing enough to save for retirement and, in the case of an inheritance or a situation where a homeowner may sell property or come into enough money to pay off their mortgage, some advisers argue that putting this money towards a retirement account, savings plan, or even investments have been a better choice for certain homeowners, as some may have taken advantage of low mortgage rates that are currently available and are not in a position where they will be paying a substantial amount more on their home in terms of interest.
There are those who argue homeowners do still stand to benefit from refinancing as this can help homeowners not only set themselves on a plan to erase their mortgage debt faster but potentially at a lower overall cost, especially with rates that we have been seeing as of late, so considering these aspects of mortgage debt relief may help some homeowners better make a decision on how to address their wants or needs to pay off their mortgage faster. We have seen refinancing, in some cases to a shorter mortgage term, become popular during different periods over the past months but homeowners are sometimes of the mind that simply getting out of debt entirely will be much more advantageous.
Since this topic is one that has been debated among homeowners and financial advisers, it will be a personal decision as to what route a homeowner takes if they are in a position to pay off their mortgage early, but thanks to current conditions in the housing market, advisers are prompting homeowners to do more research and exploration into how funds that may be used to pay off their home could be better used in the long run, especially if a homeowner has an affordable rate and payment on their mortgage at the present time.