Should You Pay Your Mortgage Off Early?

Mortgage Documents

While paying off your mortgage on your housing loan early sounds like an ideal situation, it is essential to assess your financial situation before you make such a decision. There are so many factors to the consider which could either help or hurt your wallet.


  1. You are saving money on the interest you pay over the life of the loan.
    • When you make extra monthly payments towards your principal, this will not only reduce your principal loan amount but also your interest. Paying off your principal quicker is a catalyst to paying off your mortgage over a shorter period.
  2. You are removing a debt from your finances.
    • Though mortgage is seen as a “good debt”, it is still a financial burden on you and your family. Once removed, you are allowed more freedom in your budget for things such as vacations and home projects.
  3. You are building more home equity.
    • Something mortgage lenders might require is for you to pay Private Mortgage Insurance (PMI) until you have 20% home equity. If your mortgage is paid off early, you will build your home equity faster and eliminate or drop PMI payments early. With increased home equity, you can complete a cash-out refinance with Hall Financial and use your extra funds for other expenses such as a much-needed home renovation or a big payment towards your other debts.


  1. You lose financial liquidity.
    • If you pay off your mortgage in a short amount of time, your monthly cash flow decreases. This means you have reduced access to monetary freedom. This is harmful to your bank account because if a financial emergency were to arise, you would most likely need to take out another loan.
  2. You receive less on your tax refund.
    • When you file your taxes each year, you may be able to deduct the interest paid on your mortgage. As you pay off the mortgage more quickly you will incur less interest each year so your tax deduction will decrease over time.
  3. Your credit score could take a hit.
    • Though it would be a small decrease, your credit score could decrease. This is because creditors view your monthly mortgage payment as a beneficial financial responsibility. Those consistent, on-time, monthly payments support or increase your credit score so eliminating them through paying off the mortgage may decrease your score albeit minimally.

Paying your mortgage off early truly depends on whether you are on a sound financial footing. That is why it is very important to assess each area of your finances prior to making this decision.

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