Should you pay off your mortgage early?

December 06th, 2011

So you're tired of being chained to a big mortgage and are thinking about paying it off early. There are pros and cons to an early payoff, so consider the following before focusing your time and money on this goal, and use a mortgage calculator to crunch the numbers.

Do you have a lot of cash?

Not having a mortgage payment each month could free up some of your hard-earned cash for other financial goals. It can also take away some of the stress and worry of having to pay large monthly bills. If you can actually get your hands on a large enough sum of money to pay down a mortgage, ask yourself these questions:

  1. Will you wipe out your entire savings? Savings rates are lousy and the stock market is unpredictable, so you may feel like you'll earn a better return by paying off a home loan. But keep in mind that mortgage rates are near record lows, so you might be able to refinance and lower your monthly payments without dipping into your nest egg. A refinance calculator can help calculate the savings.
  2. Will you have any cash left? Just because you pay off a home doesn't mean there won't be an emergency down the line that requires a chunk of money. If you will have enough cash left over for emergency savings after an early payoff, you may be heading in the right direction.
  3. Are you prepared to see your home equity head south even after paying off a home loan? U.S. home prices fell 1.3 percent in October from the previous month, the third month in a row of declines, according to CoreLogic. Home prices also were down 3.9 percent from a year earlier. Even if you pay off a home, it is possible that you could lose equity in this economy.

A mortgage calculator can help

Most people don't have enough cash laying around to pay off a home loan. But you can increase your monthly payments to pay off your home faster. Use the early payoff calculator to figure out how much to add to your monthly mortgage payments.


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