- By making payments earlier than required, you are saving on the interest the mortgage is costing you; the sooner you pay off your loan, the sooner you can stop making monthly payments with interest.
- Interest you save on a mortgage is tax-deductible. If you were investing the same money elsewhere, however, you’d be paying taxes on the income you make.
- By paying the principal loan sooner you’re increasing the equity you have on your home, and will be able to own it earlier than expected.
- Some mortgages come with a “prepayment penalty.” The lenders charge a fee if the loan is paid in full before the term ends.
- Making larger monthly payments means you may have limited funds for other expenses. It also means that you could miss out on investing money in other ventures that could bring you a higher rate of return.
- You may have gotten an extremely low interest rate with your mortgage. In some cases you would save more money making the regular monthly payments for a 30-year term, and using your available funds for other investments.
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