10 Pros and Cons of Paying Off Your Mortgage Early

By Tom Burchnell
paying off mortgage early pros cons

If you’re a homeowner, you may be wondering, “Should I pay off my house now?” You’re not alone; many Americans are wondering about the pros and cons of paying off their mortgage early. Figuring out whether to pay off your mortgage is a hefty decision, and you should take it seriously.

If you’re facing high mortgage payments, then you’re probably looking for ways to reduce your monthly payments. You may also be wondering whether it’s a good idea to get free of your mortgage altogether.

The truth is, paying off your mortgage has plenty of benefits – but it also comes with some downsides. This article will walk you through the pros and cons of paying off your mortgage balance ahead of schedule. 

Pros of Paying Off My Mortgage Early

There are some clear pros and cons to paying off your mortgage early. Here are a few of the pros.

1. Increase Your Monthly Cash Flow

If you can afford to make a lump sum payment towards your mortgage, it will mean that you won’t be making any more monthly payments. That means that you’ll have a lot of extra money in your pocket at the end of the month. You can put that money toward retirement, or starting a small business – or anything you’d like.

2. Stop Paying Interest

When you make a mortgage payment, you aren’t just paying back your loan. You’re also paying interest on the remaining balance of your loan. Interest payments can add up over the years. If you pay off your mortgage early, you’ll save thousands of dollars in interest payments.

3. Build Equity

Once you pay off your mortgage, you will have 100 percent equity in your home. You can use that equity to get a home equity line of credit, or HELOC, in case of future emergencies. Just remember that getting that line of credit isn’t immediate and you may need to wait before the funds come through.

4. Avoid Frivolous Spending

If you tend to be a big spender, then it might be to your benefit to pay off your mortgage as soon as you have the money. For some people, leaving money sitting in a bank account is just too much of a temptation – they can’t resist burning through it. If that sounds like you, you might be better off putting the money towards your mortgage right away.

5. Get Peace of Mind

Whether or not it’s logical, one of the pros of paying off a mortgage early is it can give homeowners tremendous peace of mind. For many people nearing retirement age, this is especially appealing, since they’re likely preparing to live on a limited income. Paying off your mortgage early can reduce stress and bring you a sense of security.

Cons of Paying Off Your Mortgage Early

Paying off your mortgage early has pros and cons. Here are some of the downsides to paying off your house ahead of schedule.

1. You’ll Use Up Your Savings

Using your savings for paying off your mortgage early isn’t always a good idea. Although it’s true that you will still have the funds in home equity, it’s hard to access those funds in case of an emergency.

Using your savings to pay off your mortgage can put you in a vulnerable position. Experts recommend that everyone build up a 12-month emergency fund that can cover their full household expenses for a year. Unless your savings are extensive, paying off your mortgage early will probably tap into that fund.

2. You May Miss Out on Other Investments

Paying off your mortgage early means that you probably won’t have the opportunity to make other investments, like buying stocks or real estate. Over the long term, other forms of investment could pay off and be worth more than the value of paying off your mortgage early.

3. You May Have Other, More Urgent Payments to Make

Financial experts say that your mortgage should be the last debt that you pay off. That’s because the interest on mortgage payments tends to be relatively low.

Financial advisers recommend that you pay off your car loans, your school loans, and your credit card debt before you pay off your home. Paying off your mortgage might feel like the responsible thing to do, but it isn’t always the most practical move.

4. Paying for Other Expenses Will Be Harder

Similarly, experts suggest that you set aside cash to pay off major expenses in the next few years. For many people, that means paying part (or all of) their kids’ college tuition.

Other typical big-ticket expenses include weddings, home remodeling, and vacations. You need to set aside money to cover those expenses now. If you use all of your money to pay off your mortgage, you may be left without a cash reserve when the next big expense comes calling.

5. You’ll Miss Out on Tax Breaks

Paying off your mortgage early means that you’ll miss out on the mortgage interest tax deduction. That can mean significant savings, especially if you’re near the beginning of your mortgage payments. It’s a good idea to calculate how much money you would otherwise save in tax deductions before you decide to pay off your mortgage outright.

Sale-Leaseback Programs

So if this paying off mortgage early pros and cons article has provided you with useful information, and the advantages of paying off your mortgage early have outweighed the cons, sale-leaseback programs can help you do that.

Sale-leaseback programs let homeowners cash out their mortgages without having to move out of their homes. Consult with an expert to learn more.

Key Takeaways

If you’re thinking about the pros and cons of paying off your mortgage early, there are a lot of factors to consider. Talk to a financial consultant to figure out if paying off your mortgage early is a good option for you.

Tom Burchnell
Written by Tom Burchnell
Director of Product Marketing

This article is published for educational and informational purposes only. This article is not offered as advice and should not be relied on as such. This content is based on research and/or other relevant articles and contains trusted sources, but does not express the concerns of EasyKnock. Our goal at EasyKnock is to provide readers with up-to-date and objective resources on real estate and mortgage-related topics. Our content is written by experienced contributors in the finance and real-estate space and all articles undergo an in-depth review process. EasyKnock is not a debt collector, a collection agency, nor a credit counseling service company.